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Gold firm as US political concerns support

Gold rose on Friday and was set to end the week slightly higher as the sudden sacking of the FBI head in the United States stoked investor concerns and boosted demand for bullion, even as the dollar headed for its strongest week this year.

Spot gold was up 0.30 percent to $1,228.01 per ounce. Gold rose 0.5 percent in the previous session, its best one-day gain in a month.

U.S. gold futures for June delivery added $3.50 to settle at $1,227.70 an ounce.

Gold
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"You continue to see the political uncertainty continue to support gold," said ETF Securities analyst Martin Arnold, naming the dismissal of the FBI's James Comey and the upcoming British election as sources of uncertainty.

U.S President Donald Trump on Thursday ran into resistance for calling ousted Federal Bureau of Investigation chief Comey a "showboat." The attack was swiftly rebuffed by top U.S. senators and acting FBI Director Andrew McCabe, who pledged that an investigation into possible Trump campaign ties to Russia would proceed.

Arnold said there were also support from concerns that the equity valuations, which over the last few months were boosted by promises of more spending by the Trump administration, could run out of steam due to "policy paralysis."

But capping gains in gold are expectations that the U.S. Federal Reserve will increase interest rates in June.

New applications for U.S. jobless benefits unexpectedly fell last week, while producer prices rebounded strongly in April, pointing to a tightening labour market and rising inflation that
could spur the Fed to raise interest rates.

Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar, in which it is priced.

The dollar was slightly softer on Friday, but headed for its best week of the year while global stocks eased from near record highs.

Traders are expecting a 100 percent probability of an interest rate increase in June, CME Group's FedWatch showed.

"We get a host of Chinese macro releases out over the weekend, providing the commodity group with more direction heading into next week as well," INTL FCStone analyst Edward Meir said.

Among other precious metals, silver rose 0.88 percent to $16.43, set for its first weekly rise in four.

Platinum rose 0.03 percent to $914.80, while palladium gained 0.22 percent to $803.25.