Gold prices climb ahead of US inflation data

Gold prices rose on Friday, erasing some of the earlier weekly losses, driven by mixed U.S. economic data and underlying strength from China's gold demand, ahead of a key U.S. inflation report that investors await to gauge the economy's health.

Spot gold GOLD was up 0.6% at $2,346.67 per ounce by 1114 GMT. U.S. gold futures GOLD rose 0.7% to $2,358.40.

U.S. GDP figures from Thursday showed the economy grew at its slowest pace in nearly two years in the first quarter, and this supports calls for interest rate cuts by central banks, which tend to push precious metals prices higher, said Frank Watson, market analyst, Kinesis Money.

"That said, inflation seems to be running hot, and while this makes interest rate cuts less likely, it also means that the purchasing power of fiat currencies continues to erode, and this can push investors to transfer wealth into safe havens like gold and silver."

Despite Friday's uptick in bullion prices, it was headed for a weekly decline - its biggest since early December, hurt mostly by a 2.7% drop on Monday after a major escalation in the Middle East crisis was avoided.

The focus now turns to U.S. March core Personal Consumption Expenditures (PCE) index data due later on Friday - the Fed's preferred measure of inflation.

"The trend in gold prices remains biased upward, and once the dust settles after the Fed's May 1 FOMC meeting, that may resume," Ilya Spivak, head of global macro at Tastylive, said.

"I don't expect that Fed policy or geopolitics will regain dominance over gold prices in the near term because it seems like China has quite a bit more reserves to buy."

Spot silver XAGUSD1! rose 0.5% to $27.56 per ounce, platinum PL1! lost 0.2% at $912.26, and palladium XPDUSD1! fell 0.7% to $967.79. All three metals were headed for weekly declines.

Meanwhile, Anglo American AAL rejected rival miner BHP Group's BHP $39 billion takeover proposal, saying the bid significantly undervalued the London-listed miner and its future prospects.