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Gold prices edged up on Friday and were on course for their first weekly gain in four, as U.S. economic data indicated a softening of price pressures, fuelling optimism that a rate cut from the Federal Reserve might be forthcoming.

Spot gold was up 0.2% at $2,306.89 per ounce, as of 0334 GMT. Bullion has gained 0.5% so far for the week.

U.S. gold futures rose 0.2% to $2,322.00.

"The data being supportive of rate cuts from the Fed over the last couple of days at the margins, not withstanding confusing communications from the Fed meeting, has caused some volatility in the gold market," said Kyle Rodda, a financial market analyst at Capital.com.

"The best recipe for gold would be continued weakness in inflation, then that recessionary appeal of gold will start to come through as a bit of an extension of expectations of potential rate cuts this year."

Data on Thursday showed that U.S. producer prices unexpectedly fell in May, another indication that inflation was subsiding after surging in the first quarter.

The data followed a cooler-than-expected CPI report that was released just ahead of the Fed meeting on Wednesday, where the central bank held interest rates steady and pushed out the start of rate cuts to perhaps as late as December.

This week's inflation data along with U.S. jobless claims data showed some weakening in price pressures and suggested the labor market was losing momentum, keeping hopes of a September rate cut from the Federal Reserve alive.

Traders are currently seeing a 67% probability of a cut in September, according to the CME Group’s FedWatch Tool.

Lower interest rates reduce the opportunity cost of holding non-yielding bullion.

In other metals, spot silver rose 0.3% to $29.08 per ounce, platinum was up 0.9% at $955.32 and palladium gained 0.8% to $890.28. All three metals were headed for weekly losses.