Gold hovers near one-week low; US data, ECB in focus

Jan 25 (Reuters) - Gold prices languished near a one-week low on Thursday as the U.S. dollar and bond yields strengthened after a strong reading of U.S. business activity, ahead of U.S. GDP data and the European Central Bank's policy meet later in the day.

FUNDAMENTALS

* Spot gold rose 0.2% to $2,015.99 per ounce by 0203 GMT, after hitting a near one-week low of $2,011.06 in the previous session.

* U.S. gold futures, were flat at $2,015.80.

* U.S. business activity picked up in January and inflation appeared to abate, with a measure of prices charged by companies for their products falling to the lowest level in more than 3-1/2 years, suggesting that the economy kicked off 2024 on a strong note.

* The dollar index rose 0.1%, hovering near a six-week high.

* Yields on benchmark U.S. 10-year Treasury notes edged slightly lower, but were not far from a more than one-month high of 4.1980% touched last week.

* On Wednesday, MSCI's global equity index rose to hit its highest level in almost two years, backed by positive earnings and economic data in both Europe and the United States as well as optimism that Chinese stimulus will support its stock markets.

* Money market pricing shows traders are betting on five quarter-point rate cuts for 2024 in the U.S., down from six cuts two weeks ago.

* The first cut, initially expected in March, is now expected in May with an 86% probability, according to LSEG's interest rate probability app IRPR.

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

* Investors are now awaiting the first reading of the U.S. fourth-quarter GDP due at 1330 GMT, ECB's policy meeting at 1515 GMT, and another inflation reading - the personal consumption expenditure (PCE) data - on Friday.

* Spot silver rose 0.3% to $22.74 per ounce, platinum rose 0.1% $899.69, and palladium fell 0.2% to $960.89. DATA/EVENTS (GMT) 0745 France Business Climate Mfg Jan 0900 Germany Business Climate New Jan 1100 UK CBI Distributive Trds Jan 1200 Canada Business Barometer Jan 1315 Euro Zone ECB Refinancing Rate Jan 1330 US Durable Goods Dec 1330 US GDP Advance Q4 1330 US PCE Prices Advance Q4 1330 US CHI Fed National Act. Idx Dec 1330 US Initial Jobless Clm w/e Jan. 20 1500 US New Home Sales Dec 1515 Germany ECB rate policy decision -- 2330 Japan Tokyo CPI Jan 2350 Japan Service PPI Dec (Reporting by Harshit Verma in Bengaluru; Editing by Sonia Cheema)