Gold Set for Biggest Weekly Loss in Four Months

Gold rose on Friday ahead of a series of speeches by Federal Reserve's officials, but was on track for its biggest weekly fall since November as prices reacted to the U.S. central bank hinting at an interest rate hike in the first half of 2015.

Fed officials including Richard Fisher, James Bullard and Narayana Kocherlakota are due to speak later on Friday, after Fed Chair Janet Yellen surprised markets mid-week by suggesting the possibility of raising interest rates early next year.

Bullion briefly touched a six-month high of $1,391.76 on Monday on tensions in Ukraine and concerns about growth in China before investors booked profits as focus shifted towards the U.S. monetary stance. It was on course for a 3.1 percent weekly fall.

Spot gold rose 1 percent an ounce to $1,341.50 by 1105 GMT, having fallen to $1,320.24 on Thursday, its weakest since end-February.

U.S. gold futures gained 0.8 percent to $1,341.50 an ounce.

"Gold moved lower after the Fed meeting and we went quickly under the $1,320 mark," ABN Amro commodity analyst Georgette Boele said. "We are seeing some support coming from the U.S. increasing sanctions to Russia and uncertainty ahead of more speeches on the Fed's policy path."

"But the main longer-term factors remain expectations for higher yields, higher interest rates and stronger dollar, which are negative for the metal."

Low interest rates, which cut the opportunity cost of holding non-yielding bullion above other assets, had been a key factor driving bullion higher in recent years.

European shares steadied, while the dollar hovered near a three-week peak against a basket of major currencies and 10-year U.S. Treasury yields rose above 2.7 percent.

An escalation of U.S. sanctions against Russia over the crisis in Crimea kept shares' investors cautious, giving support to gold, usually seen as an insurance against risk, analysts said.

U.S. President Barack Obama raised the stakes in an East-West confrontation over Crimea on Thursday by targeting some of Russian President Vladimir Putin's closest long-time political and business allies with personal sanctions.


The physical sector noted light buying from jewellers, but demand from main consumer China remained slow because of the weak yuan. Premiums for gold bars in Hong Kong were unchanged from last week at $1 an ounce to the spot London prices.

China's yuan fell to a 13-month low on Friday and was set to post its biggest weekly fall after the central bank lowered the midpoint of its permitted trading range, which is seen as a signal of official comfort with the currency's recent losses.

Weakening differentials between 99.99 percent purity gold on the Shanghai Gold Exchange and cash gold discouraged imports.

"Shanghai gold exchange is still at discounts to spot gold, and the market wants to know if the yuan will continue to depreciate," said a physical dealer in Hong Kong.

Gold jewellery exports from India edged up 1 percent in February to $718.36 million from a year earlier, an industry body statement said on Thursday.

In other precious metals, palladium rose 3.7 percent to $791.50 an ounce, its highest since August 2011, boosted by the launch of two exchange-traded funds in South Africa and increasing sanctions by Western countries on main producer Russia.

Silver rose 1.3 percent to $20.48 an ounce and platinum gained 0.8 percent at $1,436.90 an ounce.