ALSO READGold hits 6-week high after U.S. data dampens rate hike expectations Gold up, poised for more gains on soft U.S. rate outlook Gold lurches higher after weak U.S. inflation, retail data Gold dips after U.S. inflation data, set for quarterly gain Gold steady as U.S. policymakers split on rate hike outlook
By Peter Hobson
LONDON (Reuters) - Gold was on track for its first weekly rise in five weeks on Friday after weak U.S. inflation undermined the case for interest rate rises, pushing the dollar and U.S. bond yields lower.
Underlying inflation in the United States remained muted in September despite a surge in gasoline prices after hurricanes disrupted production in the Gulf.
The data came after minutes from the last U.S. Federal Reserve meeting released this week showed policymakers remained divided on U.S. inflation prospects.
Markets were pricing in an 82 percent chance of a December rate hike, down from 87 percent before the data were released, according to CME Group's FedWatch tool.
Gold is sensitive to rising rates because they push bond yields higher and tend to boost the dollar, which reduces the attractiveness of non-yielding bullion while making it more expensive for holders of other currencies.
Spot gold was up 0.5 percent at $1,300.40 an ounce at 1302 GMT after $1,302.40, the highest since Sept. 26. It was set for a weekly gain of 2 percent.
U.S. gold futures for December delivery were 0.5 percent higher at $1,302.40 an ounce.
The price gains saw gold break through Fibonacci resistance and the 50-day moving average at around $1,298.
"A close above the psychological $1,300 level would be required for the yellow metal to make a push higher," MKS PAMP trader Tim Brown said in a note.
Elsewhere, European Central Bank (ECB) chief Mario Draghi on Thursday defended a pledge to keep interest rates at rock bottom and the Bank of Japan's Haruhiko Kuroda stressed resolve to maintain ultra-loose monetary policy.
Sources told Reuters that ECB policymakers were homing in on extending their stimulus programme for nine months at their next meeting while scaling it back.
Markets were also looking ahead to a speech by U.S. President Donald Trump at 1645 GMT outlining a tougher strategy on Iran.
A more confrontational stance will add to worries over North Korea and political chaos in Washington and increase demand for gold as a safe haven, said Saxo Bank analyst Ole Hansen.
"We have Donald Trump in the White House picking a fight with everyone, which is providing some underlying support for gold," he said.
Silver was up 0.5 percent at $17.26 an ounce after hitting a three-week high of $17.35.
Platinum was up 0.8 percent at $940.70 an ounce and palladium was 2 percent higher at $992.75.
(Additional reporting by Apeksha Nair in Bengaluru; Editing by Elaine Hardcastle and Adrian Croft)