Gold near a one-week low ahead of US inflation data

Gold prices hovered near their lowest level in a week on Friday, as expectations grew for an interest rate hike in the United States, while investors awaited the release of the U.S. Consumer Price Index data later in the day.

Spot gold was virtually unchanged at $4,318.88 per ounce by 00:20 GMT, after earlier hitting its lowest level since September 2.

Prices fell by about 2 percent on Thursday, following an expected rise in U.S. producer prices for August.

Traders on Thursday leaned toward the Federal Reserve (the U.S. central bank) raising short-term borrowing costs at its meeting next week, following the release of the first major report in a series of inflation data scheduled for this week.

The final demand producer price index rose 0.4 percent last month, after a revised 0.1 percent increase in July, according to the Bureau of Labor Statistics under the U.S. Department of Labor.

U.S. consumer price index data is scheduled for release at 12:30 GMT.

Meanwhile, the European Central Bank raised interest rates for the second time this year to curb energy-driven inflation, warning that price pressures may persist for some time, thereby increasing expectations for further monetary tightening, possibly in October.

Although gold is typically viewed as a hedge against inflation, rising interest rates put pressure on the non-yielding metal.

For other precious metals, spot silver fell 0.1 percent to $63.48, platinum remained steady at $1,777.42, and palladium dropped 0.2 percent to $1,279.25.