Gold prices rallied on Friday (September 20th) and headed for a fifth straight weekly gain, with market attention focused on further cues after the US Federal Reserve's first interest rate cut of the year.

Spot gold rose 0.8% to $3,672.08 an ounce at 1:36 PM EDT (17:36 GMT). Prices have risen 0.8% so far this week. US gold futures for December delivery closed up 0.7% at $3,705.80.

The US central bank cut its benchmark interest rate by 25 basis points on Wednesday, but tempered the move with a warning about persistent inflation, raising doubts about the pace of future easing.

Following the decision, spot gold hit a record high of $3,707.40 before weakening in volatile trading. "Gold is still quite strong here and is just taking a pause after the Fed. The bullish trend remains intact with new highs inevitable, and realistically, we could see $4,000 before the end of the year," said RJO Futures market strategist Bob Haberkorn. Minneapolis Fed Bank President Neel Kashkari said labor market risks justify this week's interest rate cut and the possibility of tapering at the central bank's next two meetings.

Lower interest rates reduce the opportunity cost of holding non-yielding assets like gold. The metal also tends to perform well during periods of uncertainty and has gained nearly 40% so far this year. Physical gold premiums in India rose to a 10-month high this week as record prices ahead of the holiday season failed to deter investors from buying bullion in anticipation of further gains, while discounts in China widened to a five-year peak.

Elsewhere, spot silver rose 2.2% to $42.70 an ounce, and platinum gained 1.4% to $1,403.02. Palladium held steady at $1,150.04 and is headed for a weekly loss. "What I'm seeing is a lot of investors are now turning to platinum and silver because they're more affordable than gold," Haberkorn said. (alg)

Source: Reuters