Gold prices retreat 1% on stronger dollar as US Fed meeting looms

Gold fell 1% on Friday as the dollar rose, with zero-yield bullion giving up gains from bets for a slowdown in monetary tightening later in the year as immediate focus turned to an impending rate hike next week.

Spot gold was down 0.9% at $1,648.46 per ounce by 1008 GMT, while U.S. gold futures dropped 0.8% to $1,652.10.

The dollar index rose 0.3%, eroding the appeal of rival safe-haven gold, while also making it more expensive for overseas buyers.

Gold could see some correction due to an upside move in the dollar heading into the Fed meeting, expected to deliver a 75 basis point increase, said Vandana Bharti, assistant vice-president, commodity research at SMC Global Securities.

Bets for rising rates overall have put gold on course for a seventh straight monthly fall.

"However, with the passing of time, recession fear is getting stronger and that could probably give a much-needed support to gold prices, and limit the downside," Bharti added.

Helping drive some of gold's gains this week, the Fed was seen slowing its aggressive rate-hike pace in December, amid some signs of a U.S. economic slowdown.

But Jigar Trivedi, a senior analyst at Mumbai-based Reliance Securities, said the outlook for gold still appears bearish with investment demand still weak and retail demand also not aggressive.

"Gold should trade in a range of $1,640-$1,660 till there is an outcome from the Fed," Trivedi added.

Spot silver fell 1.9% to $19.20 per ounce, while palladium shed 0.9% to $1,924.66.

Platinum slipped 1.6% to $944.27.

But likely pushing prices higher longer term, the platinum market could see a sustained global supply deficit given output risks in key producer South Africa and a shortfall from Russia, said David Mitchell, managing director at Singapore's Indigo Precious Metals.

Global platinum mining supply is forecast to fall about 10% in 2023, he added.

(Reporting by Arundhati Sarkar and Eileen Soreng in Bengaluru; Editing by David Holmes)