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NEW YORK: Gold prices fell early on Friday on the way to the first weekly decline in three as fading chances of a US stimulus agreement before the presidential election dented the metal's appeal as an inflation hedge.

Spot gold fell 0.4% at $1,900.35 per ounce by 12:17 p.m. EDT (1617 GMT). Bullion is down 1.5% so far this week. US gold futures eased 0.2% to $1,905.10. "With a stimulus bill this year highly uncertain, gold remains beholden to the USD," said Tai Wong, head of base and precious metals derivatives trading at BMO.

"While sentiment for gold remains strongly bullish without a strong short-term driver, we seem to be oscillating around $1,900 unable to substantially break the month-long range of $1,850-$1,950."

The dollar index eased 0.2% on the day, but was on track for a weekly gain, making it more expensive for holders of other currencies to buy gold. A stronger-than-expected US retail sales report lifted appetite for riskier assets, but factory production unexpectedly fell in September.

Democrats and Republicans seemed unlikely to agree on a US stimulus deal before the Nov. 3 election even as coronavirus cases continue to rise and a labour market recovery stalls.

Gold, which has risen 25% so far this year, is considered a hedge against inflation and currency debasement amid the unprecedented global levels of stimulus.

"With so much event risk on the horizon, culminating with the US elections, we have likely seen the lows in gold for the next month or so," Jeffrey Halley, senior market analyst at OANDA, said in a note.

"Gold's likely to shift into a $1,900 to $1,975 an ounce range as the elections draw near."

Silver shed 0.3% to $24.24 per ounce, but was down over 3% for the week. Platinum gained 0.4% to $867.14, while palladium slipped 0.5% to $2,340.58.