Gold edged lower on Friday for the third straight session and notched its biggest weekly slide in nearly two months on growing expectations for an increase in U.S. interest rates as soon as next month.
New York Fed President William Dudley said on Thursday there was a strong sense among central bank officials that markets were underestimating the probability of policy tightening.
That came a day after the minutes of the Fed's April meeting revealed that most policymakers felt a rate increase might be appropriate as early as next month, sending gold to a three-week low of $1,244. It has since bounced back, as ultra-low yields and concerns over economic growth lent support.
"Those minutes from the last FOMC meeting I think really gave quite a bit of light to the possibility for that June rate hike," said Phillip Streible, senior commodities broker at R.J. O'Brien in Chicago.
"I think that the Fed is now challenged and the market is getting more confident that it's going to happen, provided that the data supports it."