Gold gains amid mixed US inflation, labor data

Gold pared a weekly decline, after hotter-than-expected inflation and a slowdown in the labor market amplified debate over the size of the Federal Reserve’s expected interest rate cut next month.

Bullion rose as much as 0.7% to trade at $2,647.25 an ounce, building on gains made in the previous session that came after mixed US economic data. Separate US reports on Thursday showed underlying inflation rose more than forecast in September, while applications for unemployment benefits last week increased to a more than one-year high.

Fed policymakers John Williams, Austan Goolsbee and Thomas Barkin were unfazed by the higher-than-expected consumer price index, suggesting officials can continue lowering rates.

Swaps markets are pricing in a 25-basis-point cut in November, with traders focusing on the potential challenges for policymakers as they attempt to keep inflation under control without cooling the jobs market too much. Lower interest rates typically benefit gold, as it doesn’t pay interest.

The precious metal is up more than 25% this year, with rate-cut optimism fueling recent gains. Strong central bank purchases and heightened geopolitical tensions have also supported gold. Hostilities in the Middle East have increased, stoking haven demand, with investors on edge as Israel plans its retaliation against Iran.

Spot gold rose 0.4% to $2,639.00 an ounce as of 8:20 a.m. in London, on track for a weekly fall of 0.4%. The Bloomberg Dollar Spot Index was flat. Silver was down, while platinum and palladium climbed.