Gold heads for best week in 3 months as inflation worries mount

A vendor arranges gold chains displayed at VJ Gold and Diamond jewellery shop in Kuala Lumpur

(Reuters) - Feb 11 (Reuters) - Gold prices rose on Friday and were on track for their biggest weekly percentage gain in three months, helped by a pullback in U.S. Treasury yields and as growing inflation concerns boosted the metal's safe-haven appeal.

Spot gold XAU= was up 0.4% at $1,833.49 per ounce by 11:42 a.m. ET (1642 GMT), poised for a weekly gain of more than 1.4%.

U.S. gold futures GCv1 eased 0.1% to $1,835.40.

"Yields are backing off just a touch, so I think gold is just catching its breath right now to figure out what its next move is," said Philip Streible, chief market strategist at Blue Line Futures in Chicago.

"There is a lot of discussion about possibility of an emergency rate hike. But in addition to multiple rate hikes, other Fed officials have downplayed Bullard's hawkishness."

Benchmark 10-year U.S. Treasury yields US10YT=RR eased after topping 2% for the first time in nearly three years in the previous session. US/

Data showing a spike in U.S. consumer prices has increased pressure on the Fed to take a stronger stand to fight inflation. Fed fund futures are pricing in chance of 50 basis points hike at next month's policy meeting. (Full Story) (Full Story)

St. Louis Fed Bank President James Bullard said on Thursday he wants a full percentage point of rate hikes over the next three policy meetings. (Full Story)

While gold is considered a hedge against soaring inflation, a resultant hike in interest rates would increase the opportunity cost of holding non-yielding bullion.

"Gold market is just waiting for a lift-off on the Fed," said Daniel Pavilonis, senior market strategist at RJO Futures. Prices have been trading in a range-bound market around the $1,800 pivot and is technically building support within this range, he added.

Silver XAG= was steady at $23.17 per ounce and was headed for a weekly gain of 3%.

Platinum XPT= fell 1.4% to $1,012.08, while palladium XPD= slipped 2.7% to $2,195.07.

(Reporting by Seher Dareen in Bengaluru; Editing by Shailesh Kuber)