Gold rose on Friday as the dollar faltered after softer-than-expected US inflation data dimmed the case for a faster pace of policy tightening by the US Federal Reserve, amid signs of movement in the Sino-US trade standoff. Spot gold was up 0.5 percent at $1,206.10 an ounce as of 0643 GMT, after having hit its highest since Aug. 28 at $1,212.65 on Thursday. It has gained 0.9 percent so far this week, on track for its first weekly gain in three.
US gold futures were up 0.3 percent at $1,211.30 an ounce. US consumer prices rose less than expected in August and underlying inflation pressures also appeared to be slowing, suggesting the Federal Reserve's pace of rate hikes could slow.
"With the data falling short of expectations, investors are thinking that the Fed may not go for a rate hike in December, even though a hike in September is definite," said Ji Ming, chief analyst at Shandong Gold Group, adding that prices could go up in the coming weeks.
Gold prices have declined about 12 percent from a peak in April amid intensifying global trade tensions and under pressure from rising US interest rates. This has driven investors towards record short positions in Comex gold and heavy liquidations in gold exchange-traded funds (ETF). Holdings of SPDR Gold, the largest gold ETF, were down 0.4 percent on Thursday and 4.1 million ounces from a April peak.