Gold set to mark best week in 7 months as markets price in end of Fed hikes

Gold prices rose on Friday, set to mark their best week since mid-March as U.S. bond yields lowered, increasing the appeal of U.S. dollar-backed bullion as markets price in a chance that Fed's rate increase cycle has come to an end.

Spot gold rose nearly 1% to $1,886.40 per ounce by 0932 GMT. U.S. gold futures added 0.9% to $1,899.20.

Despite strong U.S. inflation data on Thursday, markets were increasingly pricing in a scenario in which Fed cycling had peaked, said ActivTrades senior analyst Ricardo Evangelista.

"Lower yields, softer dollar and uncertainty about the conflict in Israel are all positive for gold," Evangelista said.

U.S. Treasury yields and the dollar fell on Friday, having strengthened in the last session and weighed on gold after data showed U.S. consumer prices increased in September. [USD/] [US/] [MKTS/GLOB]

Before the release of U.S. inflation data, gold hit two-week highs on Thursday, boosted by the dovish policy stance of top policymakers who noted that the recent rise in U.S. Treasury yields might make further rate hikes less necessary.

That, along with safe-haven demand amid the violence between Israel and the Palestinian Islamist group Hamas, set the non-yielding asset on track for a near 3% rise this week, the most since mid-March.

"I think the planets are starting to align for a bit of gold's resurgence," said Evangelista, adding that he saw prices touching $1,900 an ounce.

Investors also assessed the latest inflation data out of China, the biggest gold consumer, which showed consumer prices faltered and factory-gate prices shrank slightly faster than expected in September, with both indicators showing persistent deflationary pressures.

Spot silver climbed 1.5% to $22.16 per ounce as it looked set for its first weekly gain in three.

Platinum fell 0.3% to $866.03 and palladium dropped 0.9% to $1,134.97, both on path for weekly declines.