Gold climbs above Feb lows, heading for sixth weekly drop

Source: World Gold Council

Gold rose on Friday, climbing above the prior session's 10-1/2 month low, as the dollar and U.S. 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 0.5 percent at $1,134.11 an ounce at 2:56 p.m. EDT. The metal hit $1,122.35 on Thursday, its weakest since Feb. 2 and is down more than two percent so far this week, leaving it on track for its sixth consecutive weekly loss.

U.S. gold futures for February delivery settled at $1,137.40 an ounce.

Gold prices rose to session highs after U.S. officials told Reuters that a Chinese warship had seized an underwater drone deployed by a U.S. 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 dollar fell from the 14-year high against a basket of currencies reached on Thursday when markets repositioned for a more hawkish U.S. central bank.

"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 U.S. currency to higher levels, which when it rises makes gold more expensive for non-U.S. 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...The bearish factors for gold  namely a high U.S. dollar, rising yields and equities and risk-on investor demand appetite  leave bullion clearly on the defensive."

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 Nov. 9.

Silver gained 0.8 percent at $16.08 an ounce, after falling more than 5 percent on Thursday.

Platinum rose 1.3 percent to $905.1 after dropping to the lowest since early February in the previous session. Palladium was down 1.2 percent to $692.00, on track to end the week down more than five 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 jewelry."