Gold hits near three-week high on Fed rate-cut bets

Dec 22 (Reuters) - Gold prices climbed on Friday to their highest level in nearly three weeks, as rising bets of Federal Reserve interest rate cuts early next year pushed the dollar and bond yields lower ahead of much awaited U.S. inflation data later in the day.

FUNDAMENTALS

* Spot gold was up 0.1% at $2,047.42 per ounce, as of 0109 GMT, after hitting its highest since Dec. 4 earlier in the session. Bullion has risen 1.4% so far this week.

* U.S. gold futures rose 0.4% to $2,058.80 per ounce.

* The dollar index languished near a five-month low, making gold more attractive for other currency holders, while benchmark U.S. 10-year bond yields hovered near their lowest level since July.

* Data showed U.S. gross domestic product increased at a 4.9% annualised rate last quarter, revised down from the previously reported 5.2% pace, while weekly jobless claims increased slightly.

* The market is now pricing in an 83% chance of a Fed rate cut by March, compared with 79% before the U.S. economic data, according to the CME FedWatch tool.

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

* Fed officials have been pushing back against the idea of rapid rate cuts next year, but those remarks have done little to change investor sentiment.

* All eyes are now on the November core personal consumption expenditure (PCE) index report due at 1330 GMT, the Fed's preferred measure of underlying inflation, for more clarity on U.S. interest rate outlook.

* Expectations are for the core PCE price index to have risen 3.3% on an annual basis, compared to October's 3.5%.

* Spot silver was steady at $24.39 per ounce, while platinum eased 0.2% to $961.56 and palladium was flat at $1,213.19.

DATA/EVENTS (GMT) 0700 UK GDP QQ, YY Q3 0700 UK Retail Sales MM, YY Nov 0700 UK Retail Sales Ex-Fuel MM Nov 0745 France Producer Prices YY Nov 1330 US Consumption, Adjusted MM Nov 1330 US Core PCE Price Index MM, YY Nov 1330 US PCE Price Index MM, YY Nov 1330 US Durable Goods Nov 1500 US U Mich Sentiment Final Dec 1500 US New Home Sales-Units Nov (Reporting by Brijesh Patel in Bengaluru; Editing by Subhranshu Sahu)