* Gold up 0.8 pct for week so far
* U.S. economy accelerates, inflation weaker than expected
* U.S. dollar near 13-month lows
(Recasts, updates prices after U.S. data) LONDON, July 28 (Reuters) - Gold prices rose to a six-week high on Friday after weaker than expected U.S. inflation dampened expectations that the U.S. Federal Reserve will aggressively raise interest rates. Data on U.S. second quarter gross domestic product (GDP) and labour costs also pushed the dollar lower, making bullion more expensive for holders of other currencies.
"It showed a big fall in annual inflation rates across the board ... so there is no urgency for the Fed to raise interest rates," said Commerzbank analyst Carsten Fritsch. Gold is sensitive to rising rates because they push up bond yields, making non-yielding gold less attractive, and tend to boost the dollar.
Spot gold was up 0.5 percent at $1,264.30 an ounce at
1320 GMT after touching $1,266.84, the highest since June 14, just after the data was released. It was on track to rise for a third week in a row.
U.S. gold futures for August delivery were 0.3
percent higher at $1,263.20 an ounce. U.S. bond yields were largely flat, while global share prices were down. "The US economy remains in growth, but there's very little sign of inflationary risk in today's GDP data," Ranko Berich, Head of Market Analysis at Monex Europe, said in a note. "It's difficult to get optimistic about rates or USD off the back of today's release," he said. The dollar has weakened for five consecutive months, which together with short-covering has helped gold gain around $60 since early July, said Julius Baer analyst Carsten Menke. But he said the rally was fragile because it has been accompanied by physical market selling and he expected prices to fall to $1,200 an ounce. Gold rose through fibonacci technical resistance at $1,261.30. MKS PAMP trader Tim Brown said: "Gold looks well supported ahead of the 100-day moving average at $1,249, and a consolidation above $1,260 could support a move higher." Chinese data on Friday showed consumption of gold in the country rose by 10 percent in the first half of the year while production fell, leading to higher imports. However, the global market had a surplus of 138 tonnes in the first half as demand from physically-backed exchange traded funds tumbled, GFMS analysts at Thomson Reuters said this week.
In other precious metals, silver was up 0.8 percent
at $16.66 an ounce, on track for a third weekly gain.
Platinum was 0.9 percent higher at $930.50 an ounce
but set for its first weekly decline in three. Palladium was up 0.1 percent at $873 after touching a one-month high on Thursday, and has gained 3.3 percent this week.
(Additional reporting by Nithin Prasad and Arpan Varghese in Bengaluru; editing by Susan Thomas and Elaine Hardcastle)