Nov 13 (Reuters) - Gold prices recovered modestly on Friday after a heavy selloff in the previous session, but remained on track for a weekly decline as investors awaited key US inflation figures that could shape expectations for further Federal Reserve rate increases.
Spot gold rose 0.5% to $3,894.52 per ounce by 1209 GMT after losing nearly 4% so far this week. US gold futures for December delivery was up 0.4% at $3,898.70 per ounce.
Gold was moving higher after a big slip on Thursday, as prices had been pushed into oversold territory. The metal is undervalued currently, and gold prices have a good support level at around the $3,850 mark, said Nitesh Shah, commodity strategist at WisdomTree.
Gold prices slid 3% on Thursday, hitting a more-than-one-year low, as oil prices climbed on fading hopes for peace in the Middle East, spurring fears of higher inflation and elevated interest rates.
Markets see an 88% chance of a 25-basis-point US rate hike in December, while the probability of a larger 50-basis-point move is priced at 12%, according to CME's FedWatch tool.
Although gold is seen as an inflation hedge, higher interest rates tend to diminish its appeal as bullion pays no interest.
Federal Reserve Bank of New York President John Williams said on Thursday that more rate hikes are likely as the US central bank seeks to lower high levels of inflation in an otherwise healthy economy.
Meanwhile, the European Central Bank will deliver a final deposit rate hike in this cycle next month, according to most economists polled by Reuters.
Investors are awaiting US Producer Price Index data due at 1330 GMT for fresh signals on inflation pressures.
"If we do get hotter PPI, once again, it could cap gold gains on the upside," Shah added.
Among other metals, spot silver was steady at $50.05 per ounce, platinum fell 0.31% to $1,513.92 while palladium climbed 2% to $1,013.13.
All three metals were also on course to post losses for the week.
Reporting by Sherin Sans in Bengaluru; Editing by Tasim Zahid
