Gold prices slipped on Friday and were headed for a weekly loss as investors locked in profits after mild U.S. inflation data propelled bullion to its highest level in more than two months and weakened the case for a near-term Federal Reserve rate hike.
Spot gold was down 0.6% at $4,324.39 per ounce, as of 0538 GMT. While U.S. gold futures for December delivery slid nearly 1% to $4,379.20.
Bullion climbed to its highest point since June 5 on Thursday, before settling 1.3% lower and setting it on track for a weekly loss.
"There is some episodic and more speculative capital that's maybe taking a bit of profit in gold, because there's not a near-term catalyst quite so potent immediately in front of us," said Ilya Spivak, head of global macro at finance content network Tastylive.
"Gold may be setting up, with some choppy trading along the way, for a meaningful rally now. And if we can take out $4,400, I don't think $5,000 by year end is any kind of a sketch."
The non-yielding metal got a boost after an unexpected drop in U.S. July nonfarm payrolls last week, followed by softer inflation data this week, sharply reducing expectations of a rate hike next month.
U.S. producer prices were unchanged in July, following a revised 0.1% drop in June, while U.S. consumer prices barely increased last month as the cost of gasoline declined for a second consecutive month.
Traders are now pricing only a 33% chance of a rate hike in September, down from about 55% last week, according to the CME FedWatch Tool. FEDWATCH
Lower interest rates make gold more attractive relative to yield-bearing assets.
On the geopolitical front, Washington on Thursday threatened to maintain a naval blockade of Iran indefinitely, ratcheting up economic pressure on Tehran as ceasefire talks have floundered.
In other metals, spot silver slipped 0.9% to $63.88 per ounce.
Platinum slipped 0.4% to $1,711.10, while palladium inched 0.1% higher at $1,308.25, both touching their lowest levels since August 4 earlier in the session. Both metals were headed for a weekly drop.
