PRECIOUS-Gold prices set for weekly gain on Fed rate-cut bets

Dec 15 (Reuters) – Gold prices inched down on Friday but stayed on track for a weekly gain, as prospects of the U.S. Federal Reserve lowering borrowing costs dented the dollar and Treasury yields, boosting demand for the safe-haven asset.

FUNDAMENTALS

* Spot gold XAU=was down 0.1% at $2,033.29 per ounce, as of 0113 GMT. However, bullion has risen 1.5% so far this week. U.S. gold futures GCcv1 edged 0.1% higher to $2,047.60.

* The Fed left interest rates unchanged on Wednesday and Chair Jerome Powell said the historic tightening of monetary policy is likely over, with a discussion of cuts in borrowing costs coming “into view”.

* Fed officials estimated 75 basis points (bps) of rate cuts in 2024, with 2.4% inflation at the end of next year. Markets are now pricing in around a 75% chance of a rate cut in March, according to CME FedWatch tool.

* Lower U.S. interest rates put pressure on the dollar and bond yields, and increase the appeal of non-yielding bullion.

* The dollar=USD was heading for a weekly drop after hitting a four-month low on Thursday, making gold less expensive for other currency holders. USD/

* Benchmark U.S. 10-year bond yield US10YT=RR, meanwhile, hovered near its lowest level since July. US/

* The European Central Bank pushed back against bets on imminent cuts to interest rates on Thursday by reaffirming that borrowing costs would remain at record highs despite lower inflation expectations.

* Data showed U.S. retail sales unexpectedly rose in November. A separate report showed initial claims for state unemployment benefits dropped 19,000 to a seasonally adjusted 202,000 for the week ended Dec. 9.

* Spot silver XAG=eased 0.3% to $24.07 per ounce, while platinum XPT=fell 0.2% to $956.21 and palladium XPD=slipped 0.4% to $1,098.13.