Gold prices marked a fresh four-month high on Friday to tally a fifth week of gains in a row, finding support as the dollar extended its earlier decline despite a slightly higher-than-expected climb in core U.S. inflation.
Some "momentum and positioning for next week" may have given gold an "extra boost," said Jeff Wright, chief investment officer at Wolfpack Capital.
February gold GCG8, +0.32% rose $12.40, or 0.9%, to settle at $1,334.90 an ounce. Prices finished at the highest for a most-active contract since Sept. 11, according to FactSet data.
Gold saw a weekly gain of roughly 1%. It tallied a fifth week of consecutive gains, the longest since April. Month to date the metal has climbed 2.2%.
"Persistent U.S. dollar weakness is keeping the extended bull run in gold alive and well," Michael Armbruster, managing partner at brokerage firm Altavest, told MarketWatch. "Most traders are at a loss to explain the dollar's weakness given that the Federal Reserve is leading the way among central banks in raising interest rates."
The ICE U.S. Dollar Index DXY, -0.10%-a gauge of the greenback against a half-dozen rivals-fell 0.8% as the dollar traded at its lowest against the euro in about three years. The index traded nearly 1% lower for the week. A weaker dollar can boost the appeal of gold as an investment, as most commodities are priced in dollars.
"Typically, higher interest rates make an underlying currency more attractive relative to foreign competition," said Armbruster. "This suggests there are other drivers conspiring to undermine the dollar. One possibility is that nation states, particularly those who are not friendly with the United States, are moving away from the US dollar in their international trade of commodities and goods."
Among U.S. economic data Friday, the so-called core rate of consumer inflation, with gas and food stripped out, rose a sharper 0.3% in December, a notch above the MarketWatch forecast and the highest reading in almost a year, government data showed. Nascent inflation has been a chief factor in keeping the Federal Reserve's interest-rate reversal slow and steady and continues to color the debate over how aggressive the Fed will be this year with rate increases.
Inflation is a two-pronged influence on gold prices. Traditionally, the yellow metal has been seen as a hedge against inflation's erosive effects on other assets and some analysts think the metal will regain this function as inflation picks up this year. That said, the impact from inflation in pushing up U.S. Treasury yields can make nonyielding bullion less attractive in a rising-rate environment.
Reported separately, retail sales rose 0.4% in December, falling just short of the 0.5% MarketWatch consensus estimate.
In other metals action, March silver SIH8, +0.67% tacked on 17.5 cents, or 1%, to $17.141 an ounce, but it was down 0.8% for the week, while March copper HGH8, +0.70% shed 0.5% to $3.219 a pound, around 0.3% lower on the week.
Palladium scored another record settlement, with its March contract PAH8, +1.01% up 2.7% to $1,105.35 an ounce. April platinum PLJ8, -0.04% gained 0.6% to $996.20 an ounce-after briefly topping $1,000 for the first time since September. Both contracts were up more than 2% for the week.
Read: Palladium prices could top gold as record rally continues