Gold fell to a two-week low on Friday and headed for a weekly drop as upbeat US economic data lifted the dollar, raising anxiety over the Federal Reserve's future course. The metal was headed for a 2.8 percent weekly drop, after climbing for two consecutive weeks, as expectations the US Federal Reserve will maintain its economic stimulus seemed to have been factored in.
Spot gold was down 0.7 percent to $1,313.96 an ounce by 1244 GMT, extending Thursday's 1.4 percent slide. It earlier fell to the lowest level since October 22 at $1,311.50. Comex gold futures for December fell $10.30 to $1,313.20 an ounce. The euro plunged against the dollar after a sharp slowing in euro zone inflation left markets suddenly considering the outside chance of a cut in interest rates soon by the European Central Bank.
The dollar rose to two-week highs against a basket of currencies, in part due to a statement by the Federal Open Market Committee that was not as dovish on the timing of curbing stimulus as investors had expected "The weakness we have been seeing in gold in the past two days is due to the after-effects of the FOMC statement and also the extremely low inflation rate in the euro zone," Commerzbank analyst Daniel Briesemann said.
"These factors are very supportive of the dollar, which in turn weighed on precious metals prices." The dollar also got a boost from US data showing the pace of business activity in the Midwest region had risen more than expected in October and weekly jobless claims declined, soothing some worries about sluggish fourth-quarter growth. A stronger US currency makes dollar-denominated assets such as gold more expensive for foreign investors.
Market focus remains heavily on US monetary policy and how soon the Fed will begin tapering its $85 billion a month support programme. Later on Friday, investors will closely monitor the US ISM survey of manufacturing for October. Prices had gained 8 percent, since hitting a three-month low in mid-October, after soft US data last month and Washington's budget gridlock led investors to bet the Fed would postpone the tapering of its bullion-friendly stimulus measures.
As a gauge of investor sentiment, New York's SPDR Gold Trust, the biggest gold-backed ETF, reported an outflow of 34 tonnes in October, its biggest monthly drop since July. That brings its outflows for the year to 479 tonnes, or more than $20 billion this year. Holdings of the fund are near four-year lows of 872 tonnes. Spot silver was unchanged at $21.85 an ounce after falling to its lowest since October 17 at $21.66 earlier in the day. It had fallen 3.5 percent on Thursday, its biggest one-day loss in a month.
The biggest silver ETF, the iShares Silver Trust, also recorded a monthly outflow of 127.4 tonnes in October, its first since June. Spot platinum was up 0.2 percent at $1,451.74 an ounce, gaining modest support from news that 7,000 members of South Africa's National Union of Mineworkers will down tools at Northam Platinum on Sunday night in a strike over wages.
Spot palladium fell 0.4 percent at $732.00 an ounce.
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