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Gold falls to 3-week low, set for biggest weekly drop in 9

Gold
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Gold fell to a three-week low on Friday, extending two days of losses and heading for its biggest weekly drop since August on the chance the U.S. Federal Reserve may still raise interest rates this year.

The Fed indicated after a two-day policy meeting this week that a December rate rise is still on the table, curbing talk that a run of downbeat economic data and worries about the global economy would push a hike back to 2016.

Rising interest rates tend to weigh on gold because they lift the opportunity cost of holding non-yielding bullion.

"Our economists are expecting the Fed to raise rates in December," Macquarie analyst Matthew Turner said.

"To bring about that expectation, we'd have to see some reasonable economic data, sufficient to show we're not entering a new slowdown, and for some of the other market measures like the Fed Funds futures to be pricing in more of a rate hike expectation. That should see the gold price falling."

Spot gold was down 0.3 percent at $1,141.66 an ounce, after slipping to its lowest since Oct. 9 at $1,139.11, just above the 100-day moving average. It was on track to close October up 2.4 percent.

U.S. gold for December delivery settled down 0.5 percent at $1,141.40 an ounce.

"The momentum's building up to the downside here and $1,130 is likely to be put to test," said Eli Tesfaye, senior market strategist for brokerage RJO Futures in Chicago.

Read MoreGold down 1% after Fed signals possible December rate hike

Gold fell despite the 0.7 percent drop in the dollar against a basket of currencies, typically a source of support. The yen strengthened after the Bank of Japan made no move on monetary policy.

Silver prices are on track for the biggest monthly rise since January, up 7 percent. Silver was down 0.2 percent at $15.53 an ounce on Friday.

The gold-silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, rose back to 73.8 on Friday, recovering further from the four-month low of 71.3 hit earlier this month.

Spot platinum was down 0.8 percent at $981.75 an ounce, while palladium was up 0.7 percent at $672.75.

Platinum- and palladium-backed exchange-traded funds tracked by Reuters are facing their biggest monthly outflows since the data series began in 2010, after prices of the white metals slid to multi-year lows earlier this year.