Gold price gives back some of sharp overnight gains

New York (Sept 26)  Gold fell from one-month highs on Friday after Federal Reserve chair Janet Yellen kept the door open to an increase in US interest rates this year, sparking a dollar rally, while palladium was on track for its biggest weekly rise in almost four years.

Expectations for a rise in ultra-low rates, which have cut the opportunity cost of holding gold while weighing on the dollar, have helped push the metal down 5 per cent this year.

Gold rallied after the Fed opted at its September policy meeting to keep rates on hold, hitting its highest since August 25 on Thursday as dollar weakness prompted a wave of short covering. It has failed to maintain those gains, however.

Spot gold was down 0.5 per cent at $US1148.6 an ounce at 3.41pm in New York, having climbed 2.1 per cent on Thursday, its biggest one-day rise since January. US gold futures for December delivery settled down 0.7 per cent at $US1145.6, on track for their fifth straight quarterly loss.

Prices will likely meet resistance around the $US1150 per ounce mark, the 100-day moving average, traders said.

"The sell-off is most likely on the clarity from the Fed on a rate hike in December," Pradeep Unni at Richcomm Global Services said. "It's clear from (Yellen's) talk that the Fed paused in September only for the global markets' sake."

The speech on Thursday afternoon in the US sent the greenback to a five-week high against a basket of major currencies. The dollar extended gains after data showed the US economy expanded more than previously estimated in the second quarter.

Silver was down 0.3 per cent at $US15.12 an ounce, while platinum dipped 1.18 per cent at $US951.25 an ounce. Palladium was up 0.84 per cent at $US665 an ounce, off a nearly 12-week high at $US674.50.

Platinum hit a 6-1/2-year low on Wednesday and was set for its biggest weekly drop since mid-July on fears that demand from the auto sector, where the metal is used in diesel catalysts, could fall following the Volkswagen emissions scandal.

In contrast, palladium, used more heavily in gasoline auto catalysts, was poised for its biggest weekly rise since December 2011, up 9 per cent, on expectations that consumers could move away from diesel towards gasoline vehicles.

Source: SMH