Gold bars are seen at the Austrian Gold and Silver Separating Plant 'Oegussa' in Vienna, Austria. File Picture: REUTERS/LEONHARD FOEGER
Gold bars are seen at the Austrian Gold and Silver Separating Plant 'Oegussa' in Vienna, Austria. File Picture: REUTERS/LEONHARD FOEGER

Bengaluru — Gold prices rose for a third consecutive session on Friday to their highest since September as the slumping dollar drew investors to buy the metal. Bullion is on track for its fifth weekly gain.

Spot gold edged up 0.3% to $1,326.68/oz by 3.18am GMT. Prices rose their highest since September 15 2017, at $1,327. Gold is up 0.5% for the week so far and the streak of weekly gains is the most since the week ending April 14. US gold futures were up 0.3% at $1,326.90/oz.

The dollar index, which measures the greenback against six rival currencies, fell to its lowest since September 20 2017, at 91.689. The euro jumped against the dollar as the European Central Bank (ECB) signalled it could begin to wind down its €2.5-trillion stimulus programme this year. A stronger euro potentially boosts demand for gold by making dollar-priced bullion cheaper for European investors.

"There is a lot of doubt on how long prices have run from here.… Prices have only risen despite the Fed raising interest rates and main driver has been the US dollar, which we continue to see help gold run higher in the first quarter," said Brian Lan, MD at dealer GoldSilver Central in Singapore.

"Gold has to breach the recent high of $1,327, above which prices can touch $1,360."

Spot gold was expected to test a resistance at $1,329/oz, with a good chance of breaking above this level and rising more to the next resistance at $1,341, said Reuters technical analyst Wang Tao.

The greenback was also under pressure after data showed producer prices in the US fell for the first time in nearly one-and-a-half years in December amid declining costs for services. Weak inflation at the producer level could add to the concern that the factors restraining inflation could become more persistent and result in the US Federal Reserve being more cautious about raising interest rates this year.

Higher rates could dent demand for non-interest-paying gold.

Investors will be watching the US consumer price index (CPI) data due later on Friday, which is expected to show inflation increased 0.2% in December after rising 0.4% in November.

Among other precious metals, spot silver rose 0.7% to $17.06/oz. Silver is on track for its first weekly loss in five weeks. It was down about 1% so far this week.

Platinum rose 0.5% to touch its highest since September 12 at $990.20/oz. Platinum was on track for its fifth straight weekly gain. It has risen 1.7% so far this week.

Palladium was up 0.4% at $1,087.95/oz, after dropping to a more than one-week low at $1,075.50 on Thursday.