Rate hike bets keep gold on track for its worst week in four months

By Sherin Sans

Nov 13 (Reuters) - Gold firmed on Friday as a US inflation reading came in largely in line with expectations, alleviating some bets on a bigger rate hike, but bullion's selloff to an over one-year low in the previous session kept it on track for a weekly decline on expectations of further Federal Reserve tightening.

Spot gold was up 0.6% at $3,898.84 per ounce as of 9:50 a.m. ET (1450 GMT), after briefly touching a session high of $3,922.97 when the US Producer Price Index data came out. US gold futures for December delivery were up 0.5% at $3,903.00 per ounce.

The Producer Price Index for final demand rose 0.3% last month after an upwardly revised 1.4% surge in September, data showed on Friday. A Reuters poll had forecast PPI climbing 0.4%.

"Gold is struggling to hold initial gains from PPI as bond markets continue to struggle confronted with Fed hawkishness. PPI didn't surprise high like last month but core at 0.3% month-on-month remains too high for policymakers," independent analyst Tai Wong said.

Gold prices slid 3% on Thursday, hitting a more-than-one-year low, as oil climbed, spurring fears of higher inflation and elevated interest rates. The fall was accentuated by hotter-than-expected Consumer Price Index data earlier this week.

Bullion has shed more than 4% so far this week and is poised to log its worst week since early June.

"It's been a tough week for gold, which may struggle to retake 4,000 with Fed hawks out in force," Wong added.

Markets see an 89.4% chance of a 25-basis-point US rate hike in December, versus 96.2% before the PPI data. However, the probability of a larger 50-basis-point move is seen at 10.6%, slightly lower than the 13.8% chance before PPI.

Higher interest rates tend to diminish non-yielding gold's appeal.

Among other metals, spot silver fell 0.2% to $49.91 per ounce, platinum fell 0.4% to $1,512.03, while palladium climbed 2.1% to $1,014.74.

All three metals were also on course to post losses for the week.