Gold prices fell to a one-week low on Tuesday on speculation that the eventual successor to U.S. Federal Reserve Chair Janet Yellen will favor higher interest rates.
"It's partly (the possibility of a hawkish Fed chair) and that the Fed is going to and needs to hike rates this year that is contributing to a bullish dollar environment," Martin Arnold, commodities analyst at ETF Securities, said.
President Donald Trump was favoring policy hawk John Taylor as the next head of the Fed, Bloomberg reported, pushing the dollar higher and lifting U.S. Treasury yields.
Taylor, a Stanford economist, is seen as more likely to raise rates than Yellen, which would boost the dollar and dent gold and U.S. Treasuries Meanwhile, the U.S. Labor Department said on Thursday import prices jumped 0.7 percent last month, the biggest gain since June 2016, pushing inflation expectations higher and increasing the likelihood of monetary policy tightening.
The Fed will probably need to raise rates in December and then three or four times "over the course of next year", assuming U.S. unemployment continues to fall and inflation rises, Boston Fed President Eric Rosengren said.
Gold generally loses some of its in appeal when interest rates are higher as it yields no interest.
Palladium, used mainly in auto catalytic converters, rose 0.82 percent to $980.45 an ounce, after hitting its highest since February 2001 in the previous session.
Analysts are wary about the price of palladium overheating in response to higher demand in the world's biggest auto market, China, and an expected supply deficit this year.