Gold rose on Friday, climbing above the prior session's 10-1/2 month low, as the dollar and US stocks dipped at the end of a volatile week highlighted by the Federal Reserve's signal that there could be more rate hikes than previously expected in 2017.
Spot gold was up 0.6 percent at $1,135.16 an ounce by 2:30 p.m. EST (1930 GMT). The metal hit $1,122.35 on Thursday, its weakest since February 2 and is down 2 percent so far this week, leaving it on track for its sixth consecutive weekly loss.
US gold futures settled up 0.7 percent at $1,137.40. Gold prices rose to session highs after US officials told Reuters that a Chinese warship had seized an underwater drone deployed by a US oceanographic vessel in the South China Sea. "It gave gold a little bit of a boost but it was a knee jerk spike. It looks like both sides are trying to tweak each other, if you will," said Bill O'Neill, co-founder of LOGIC Advisors. "Today's something of a consolidation day across the board." "The rate hike this week from the Fed and the hawkish outlook for next year leave a fairly negative picture for gold," ING commodity strategist Warren Patterson said.
Higher interest rates next year could propel the US currency higher, making gold more expensive for non-US firms. "The nature of recent gold selling implies fresh shorting as well as liquidation," HSBC analyst James Steel said in a note. "The selling may not yet be exhausted." Highlighting investors' lack of appetite for gold are physically backed gold exchange traded funds; holdings of the SPDR Gold Trust, the world's largest gold ETF, are down more than 10 percent since November 9.
Silver gained 0.6 percent at $16.05 an ounce, after falling more than 5 percent on Thursday. Platinum rallied 3.50 percent to $924.80, after dropping to the lowest since early February in the previous session. Palladium was down 1.5 percent at $689.50 after falling to a one-month low at $677.25. It is on track to end the week down more than 5 percent. "We would refrain from buying (platinum or palladium) at this point in time," Julius Baer analyst Carsten Menke said in a note. "We have become more cautious on the demand backdrop, primarily related to autocatalysts and jewellery."
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