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Dollar's gain is gold's loss as it hits 9-1/2 month low

Gold bullion bars and coins.
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Gold bullion bars and coins.

Gold prices tumbled to 9-1/2 month lows on Friday, heading for a for a third consecutive weekly decline as investors sold on factors including expectations of a U.S. interest rate rise.

Spot gold was down 0.04 percent at $1,182.76 an ounce at 1:25 p.m EDT as funds took profits on short positions, from an earlier $1,171.21, its lowest since Feb. 8. The precious metal has fallen about seven percent so far in November, leaving it on track for its largest monthly fall since June 2013.

U.S. gold futures for December delivery settled at $1,178.20.

"Investors are still retreating from gold, though prices falling below $1,200 has promoted some profit-taking," said Commerzbank analyst Eugen Weinberg.

"Gold is being driven by many factors including equity markets, currency markets and expectations of higher U.S. interest rates, which are going to be a huge burden."

Equity markets have rallied since Donald Trump won the U.S. Presidential election.

The U.S. Federal Reserve is expected to raise rates at its December meeting. That would further boost the dollar, making commodities more expensive for holders of other currencies.

Markets are now pricing in a nearly 100 percent probability of a December Fed rate increase, according to CME FedWatch.

The dollar has gained more than six percent against other major currencies since the start of October.

Overall holdings of physical gold in exchange traded funds (ETF) have fallen more than five percent to 54.135 million ounces since Nov. 9, the day after the election.

"A further test of the downside cannot be ruled out just yet, especially as ETF liquidations persist," UBS analysts said

in a note. "Further pressure heading into the December FOMC meeting is possible."

Traders say the U.S. monthly jobs report due on Dec. 2 will be key to market sentiment, but that it probably won't deter the U.S. central bank.

"Technically, it doesn't look good," a trader said, adding gold's foray below $1,171.68, a Fibonacci retracement level, could mean further falls. "But we may see some consolidation first."

Elsewhere, silver gained 1.1 percent to $16.43 an ounce and palladium slipped 0.1 percent to $728.50.

Platinum ceded 0.5 percent to $906.15, having earlier hit its lowest since Feb. 8 at $901.00.

— An earlier version misstated U.S. gold futures for December delivery as settled.