Gold prices eased on Friday pressured by a strong dollar, but were set for their biggest weekly jump in six months, as concerns over high US consumer prices drove interest in the metal as an inflation hedge.
Spot gold fell 0.3% to $1,856.20 per ounce by 0419 GMT, after leaping to a five-month peak on Wednesday. US gold futures eased 0.3% to $1,857.90.
The dollar index soared to its highest since July 2020, pressuring bullion by increasing its cost to buyers holding other currencies.
But the metal is still on track for its biggest weekly gain since May 7, after US consumer prices recorded their sharpest one-year jump in 30 years last month.
"Inflation is getting driven by supply chain issues and until these supply chains open up, there's going to be continued price pressure and this should support gold," said Stephen Innes, managing partner at SPI Asset Management.
The sharp rise in inflation also prompted investors to boost bets that the Federal Reserve will raise interest rates sooner than expected.
"Supply chain pressures could extend further, leading to longer-lasting inflation and interest rates may not rise quick enough to contain it, so gold can still rise for a while, though a rate hike cycle should ultimately push bullion lower," Innes added.
Interest rates hikes are likely to reduce gold's appeal as higher interest rates increase the non-yielding metal's opportunity cost.
Investors also took stock of data on Thursday which showed Britain's economic recovery lagged behind other rich nations in the July-September period, which underscored the interest rate dilemma facing the Bank of England.
Spot silver fell 0.5% to $25.10 per ounce but was en route to its best week in three.
Platinum fell 0.4% to $1,081.90, but was on course for its biggest weekly rise in a month. Palladium dropped 0.5% to $2,048.91.
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