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Gold set for first weekly gain in four on US rate-cut hopes

Marked ingots of 99.99 percent pure gold are placed in a cart at the Krastsvetmet non-ferrous metals plant in Krasnoyarsk

By Harshit Verma

(Reuters) - Gold prices rose over 1% on Friday and were on track for their first weekly gain in four, as signs of slowing inflation in the U.S. raised hopes of a rate cut later this year and a stock selloff across Europe also lent support.

Spot gold was up about 1.3% at $2,332.55 per ounce by 1:55 p.m. ET (1755 GMT). Bullion gained 1.8% for the week.

U.S. gold futures settled 1.3% lower at $2,349.1.

In wider financial markets, European stock indexes dropped as French assets took a beating due to the country's political turmoil. Cautious mood prevailed on Wall Street, with investors pausing after strong gains in the S&P 500 and the Nasdaq indexes. [.N] [MKTS/GLOB]

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"That combination of weaker equities, and some interest rate declines (in Fed funds futures pricing), are reigniting interest in gold, despite the fact that the Federal Reserve has moved the dots at its FOMC meeting," said Bart Melek, head of commodity strategies at TD Securities.

Traders raised their bets to price in about 52 basis points (bps) of cuts (or two quarter-point cuts) by December-end after softer inflation data this week.

That was an increase from 37 bps last Friday, when a stronger-than-expected jobs report doused early rate cut hopes, according to LSEG's interest rate probability tool, IRPR. [FEDWATCH]

Lower rates tend to boost appeal for non-yielding bullion by making it a more attractive investment, compared with other assets such as Treasury bonds.

Data this week showed consumer prices were unchanged in May for the first time in nearly two years, while producer prices unexpectedly fell.

However, the U.S. Federal Reserve's median "dot plot" released after its two-day policy meeting - where it kept interest rates steady - showed the policymakers projecting just one quarter-point cut.

"It's still not a done deal here. There could be continued pull below $2,300 in the near term as the market reassesses the dots," Melek added.

Spot silver rose 1.6% to $29.46 per ounce after hitting its lowest level in nearly one month in the previous session.

Platinum was up 0.8% at $953.99 and palladium gained 1.3% to $894.50.

(Reporting by Harshit Verma and Rahul Paswan in Bengaluru; Editing by Shreya Biswas, Krishna Chandra Eluri and Alan Barona)