Gold eases on firm dollar but heads for first weekly gain in four

  • Palladium hovers near five-month peak touched on Thursday.
  • Platinum hits 6-week top.
  • September Fed rate hike already priced in — analysts.

Gold prices edged lower on Friday as the dollar firmed on persistent concerns about an escalating trade between the United States and China in a week where both sides slapped new tariffs on each other's goods.

China hopes the United States will show sincerity and take steps to correct its behaviour, its commerce ministry said on Thursday, amid new levies in a long-standing tit-for-tat dispute.

The dollar's status as the chief reserve currency makes the U.S. currency the prime beneficiary of concern over trade conflicts on bets that the United States has less to lose from the dispute.

Spot gold fell 0.7 percent to $1,199.17 per ounce, after touching its highest since Sept. 13 at $1,211.02. But the metal was still headed for its first weekly gain in four.

U.S. gold futures were down 0.6 percent at $1,204.30 per ounce.

Mitigating further losses in gold were views that new U.S. and Chinese tariffs were set at lower rates this week than expected.

"The fact that concerns eased a bit this week weighed on the dollar a bit but that has reversed and so that is why gold is easing," said FOREX.com analyst Fawad Razaqzada, adding that gold was facing resistance between $1,205-$1,215 per ounce.

The dollar rose against a basket of major currencies, making gold more expensive for holders of other currencies, while equity markets and bond yields rose.

Investors are awaiting next week's Federal Reserve meeting, where the U.S. central bank is widely expected to raise benchmark interest rates.

Meanwhile, hedge funds and money managers cut their net short position in COMEX gold and silver contracts in the week to Sept. 11.

Investment bank Goldman Sachs slashed its three, six and twelve-month gold price forecasts but said there were signs that fundamentals were starting to change, with a recent weakening of the dollar and a rebound in Chinese and Indian gold purchases.

Among other precious metals, spot silver rose 0.6 percent to $14.35 an ounce, after rising to two-week highs of $14.41.

The gold/silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, is at a record high of 83.

This has pulled more investors into silver, which offers more value as the current ratio is higher than the historical five-year of 72.5, ING bank said in a note.

Palladium touched its highest since April 19 at $1,056.72 per ounce and was up 0.5 percent at $1,055.22 an ounce.

Platinum hit its highest since Aug. 9 at $838.40.