Gold prices rose 1% on Friday, supported by lower U.S. Treasury yields amid growing optimism for an interest rate cut by the Federal Reserve in September after data showed U.S. prices rose modestly in June.

Spot gold was up about 1% to $2,386.99 per ounce by 10:17 a.m. ET (1417 GMT), after hitting its lowest since July 9 on Thursday. U.S. gold futures for August delivery rose 1.4% to $2,386.

"Today's mixed-to-weaker U.S. data suggests inflationary pressures and economic activity are waning, paving the way for the Fed to cut rates twice this year," said Fawad Razaqzada, market analyst at Forex.com.

Fed policymakers on Friday got fresh evidence of progress on their battle against inflation, fuelling expectations they will use their meeting next week to signal interest-rate cuts starting in September.

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

The personal consumption expenditures (PCE) price index nudged up 0.1% last month after being unchanged in May, the U.S. Commerce Department's Bureau of Economic Analysis said.

Following the data, benchmark 10-year note yields fell to a one-week low.

Meanwhile, physical demand in India, the second-largest consumer, received a boost as the country slashed import duties on gold and silver earlier this week. Gold premiums in India jumped to their highest level in a decade this week as well.

"Any uptick that we see from India or China tends to have an outside effect on overall demand ... I think the move to reduce the duty (in India) can only have a positive effect on demand," said Everett Millman, chief market analyst with Gainesville Coins.

Spot silver fell 0.6% to $27.80 per ounce on Friday, tracking its worse week since early December.

Platinum was up 0.1% at $931.83, while palladium lost 1.1% to $897.

Silver, platinum and palladium were headed for their third straight weekly fall.

(Reporting by Rahul Paswan and Brijesh Patel in Bengaluru; Editing by Shounak Dasgupta)