Gold on Track for Weekly Gains Amid Renewed Fed Rate Cut Hopes

 Gold prices hovered near a five-week high on Friday and were set for a third straight week of gains, as U.S. inflation data released earlier this week revived expectations that the Federal Reserve might cut interest rates more than once this year.

Spot gold was flat at $2,711.63 per ounce, as of 0629 GMT. Bullion has gained about 1% so far this week, having hit its highest since Dec. 12 on Thursday.

U.S. gold futures slipped 0.4% to $2,741.20.

Gold has been supported by weakness in the dollar after inflation data this week sided with rate-cut expectations, said Ajay Kedia, director at Kedia Commodities in Mumbai.

"We see support at $2,694 and a breach of the $2,720 level will take prices towards $2,770 on the higher side," Kedia said.

Expectations for more Fed rate cuts grew after data on Wednesday showed softer-than-expected core inflation and Fed Governor Christopher Waller said on Thursday three or four rate reductions are still possible this year if U.S. economic data weakens further.

"While market expectations around the Fed rate cuts remain crucial, we believe gold will assert its risk diversifier appeal amid macro and geopolitical uncertainties," ANZ analysts said.

"We believe gold's sensitivity to its traditional drivers - interest rates and the U.S. dollar - will continue to be volatile in 2025."

President-elect Donald Trump is set to begin his second term next week and the focus remains on his policies that analysts expect would fuel inflation.

"Increased uncertainty due to the incoming administration and its potential actions are influencing gold as an instrument to trade short-term volatility," said Michael Langford, chief investment officer at Scorpion Minerals.

Spot silver fell 0.4% to $30.64 per ounce, but was set for its third consecutive weekly gain.

Palladium eased 0.5% to $936.25, losing about 1% so far this week. Platinum steadied at $932.01 but was headed for its worst week since August.