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

Spot gold edged up 0.3 per cent to $1,326.68 an ounce by 0318 GMT. Prices rose their highest since September 15, 2017, to $1,327. Gold is up 0.5 per cent 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 per cent at $1,326.90 an ounce.

Dollar index

The dollar index, which measures the greenback against six rival currencies, fell to its lowest since September 20, 2017, to 91.689. The euro jumped against the dollar as the European Central Bank signalled it could begin to wind down its 2.5 trillion euro ($3.01 trillion) stimulus programme this year.

A stronger euro potentially boosts the 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, managing director 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 is expected to test a resistance at $1,329 per ounce, with a good chance of breaking above this level and rising more to the next resistance at $1,341, according to Reuters technical analyst Wang Tao.

Weak producer prices

The greenback was also under pressure after data showed producer prices in the United States fell for the first time in nearly 1-1/2 years in December amid declining costs for services. Weak inflation at the producer level could add to concerns 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 likely increased 0.2 per cent in December after rising 0.4 per cent in November.

Among other precious metals, spot silver rose 0.7 per cent to $17.06 an ounce. Silver is on track for its first weekly loss in five weeks. It was down about 1 per cent so far this week. Platinum rose 0.5 per cent to touch its highest since September 12 at $990.20 an ounce.

Platinum was on track for its fifth straight weekly gain. It has risen 1.7 percent so far this week. Palladium was up 0.4 per cent at $1,087.95 an ounce, after dropping to a more than one-week low at $1,075.50 on Thursday.

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