Gold slips for third day after Fed comments boost dollar

Gold prices fell again on Friday as hawkish comments on US interest rates from a top Federal Reserve official helped lift the US dollar, and as buyers continued to cash in on this week's price rally.

Spot gold was down 0.67 per cent at $1,329.02 per ounce by 2:18 p.m. EDT (1818 GMT), while US gold futures for December delivery settled down $7.1, or 0.53 per cent, at $1,334.5 per ounce.

The metal stayed on track for a second successive weekly gain. Gold was 0.5 per cent higher on the week, having jumped 1.8 per cent to $1,352.65 an ounce on Tuesday.

Soft jobs and services data this week have dented expectations that ultra-low interest rates, a key support for non-yielding gold, will rise this year. But investors remained uncertain on the outlook for rates, however, with Fed officials recently taking a more hawkish tone.

"Gold and silver really came under pressure on renewed expectation that the Fed is actively pursuing an interest rate hike. Before it seemed like more of a long shot," said Phillip Streible, senior market strategist for RJO Futures in Chicago.

The dollar rose against a basket of major currencies after Boston Fed President Eric Rosengren said the US central bank increasingly faces risks if it waits much longer to hike rates, pressuring gold. [FRX/]

Growing speculation that the Fed would stand pat on interest rates after hiking for the first time in nearly a decade in December have helped push gold 26 per cent higher this year.

"The problem with gold currently is that on the technicals side we've now twice been around $1,375-1,380, so if it gets back towards there, people are just taking profits," ABN Amro analyst Georgette Boele said.

Expectations for further policy divergence between the United States and the euro zone were dampened after the European Central Bank held off signalling a move towards further policy easing at a meeting on Thursday.

"The ECB's decision to leave policy unchanged may have refocused market participants on the possibility that the Fed sends a hawkish signal in the coming days before its pre-meeting quiet period begins next Tuesday," BNP Paribas said in a note.

Holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Shares, fell 0.13 per cent to 950.62 tonnes on Thursday. 

Gold demand in Asia remained subdued this week as higher prices kept buyers at bay. Silver was down. Spot silver was down -2.11 per cent at $19.18 per ounce, while platinum platinum was down 1.96 per cent at $1,061.35 an ounce.

Palladium was down 1.17 percent at $674.5 an ounce.