Gold rises to three-week high

LONDON, Feb 16 (Reuters): Gold rose to a three-week high on Friday as stronger-than-expected inflation data this week boosted interest in the metal as a hedge against price pressures.

Gold is holding on track for its biggest weekly gain in nearly two years, snapping two straight weeks of losses that pulled it back from last month's 1-1/2 year peak.

Spot gold was up 0.4 per cent at $1,358.83 an ounce at 1030 GMT, while US gold futures for April delivery were up $6.40 an ounce at $1,361.70.

"For me that's the key thing to watch for gold," Oxford Economics' director of commodity services Daniel Smith said. "Gold tends to do particularly well in that kind of environment."

Signs of rising inflation were also helping drive the metal higher, he said. "If inflation expectations rise faster than nominal rate expectations, then this should add fuel to the fire, particularly in an environment of US dollar weakness."

Spot gold has risen 3.2 per cent so far this week, putting it on track for its biggest weekly rise since April 2016. Gold has fared less well in other currencies, rising 1.0 per cent in euro terms and 1.5 per cent in sterling.

Data this week showed US producer prices accelerated in January, while initial claims for state unemployment benefits increased in the week ended Feb 10.