Gold eased on Friday, heading towards its biggest weekly decline in 2-1/2 months, as the dollar climbed from last week's three-year low on the back of higher Treasury yields. The precious metal has come under heavy pressure this week from a recovery in the US currency and expectations that the US Federal Reserve will press ahead with increases to interest rates this year, which tend to weigh on non-yielding bullion.
Spot gold was down 0.2 percent at $1,328.66 an ounce at 1430 GMT, its fifth losing session in six. US gold futures were down 0.2 percent at $1,330.50. Spot prices have shed 1.4 percent this week, their biggest weekly decline since early December, after failing to sustain a brief push back above $1,360 an ounce last Friday.
"Once again gold failed to break resistance at $1,360/1,370," said ActivTrades analyst Carlo Alberto de Casa. "What we are seeing is the consequence of this, and of the US dollar recovery seen in the last few days." Volatility has jumped across financial markets this month as investors worried about the pace of US rates increases in the wake of data showing a rise in inflation.
Stocks have steadied after recent sharp losses, while the dollar has found its feet after falling last week to its lowest since the end of 2014. Rising US yields have put the currency on track for its second biggest weekly gain of the year. Minutes of the Fed's latest rate-setting meeting were released this week and emphasised confidence in the need to keep raising interest rates.
"Despite the hawkish stance by the Fed, which drove this move in the gold price, we are still above the $1,300 mark," said Think Markets' chief market analyst Naeem Aslam, flagging a key support level. On the physical gold markets, traders said buying was muted in China after the week-long Lunar New Year holiday that closed financial markets until Thursday. Among other precious metals, silver was down 0.4 percent at $16.54 an ounce, palladium firmed by 0.2 percent to $1,040.30 and platinum dipped by 0.3 percent to $987.49.
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