Gold prices surrendered early gains to hit a session low at $1,649.09 an ounce on Friday after Federal Reserve chairman Ben Bernanke said the US central bank would act as needed to boost growth, but was mindful of risks. Spot gold was down 0.1 percent at $1,654.11 an ounce at 1405 GMT, having earlier risen as high as $1,663.50. US gold futures for December delivery were down $2.50 an ounce at $1,654.70.
Spot prices hit a 4-1/2 month high on Monday in a rally sparked by the release of minutes of the Fed's last policy meeting, which suggested that it was ready to take action to stimulate the US economy if economic data did not improve. Gold, silver and platinum were all on course to post their best month since January, lifted in part by speculation over steps the Fed may take to boost sluggish growth.
Gold prices jumped to 4-1/2 month highs at $1,676.45 an ounce on Monday, driven by talk of more QE. They have since settled back as investors await Bernanke's speech, and may be vulnerable to a correction if it disappoints. "There is certainly something already priced in for Jackson Hole, and there is a bit of disappointment potential here," Tobias Merath, an analyst at Credit Suisse, said.
"Expectations for more monetary easing would have to be fulfilled to break higher here," he added. "For now, we have a bit of a cautious approach to the gold market." Gold prices more than doubled after the US central bank launched its first round of QE in 2008. Easing measures keep long-term interest rates, and hence the opportunity cost of holding gold low, boost liquidity, undermine the dollar and fuel fears of inflation further down the line.
The prospect of more QE will largely be dependent on forthcoming US data, analysts said. "What investors have to try to bear in mind when assessing Bernanke's comments later today is that before the September 12-13 FOMC meeting, there is one payrolls report and two initial claims releases," UBS said in a note.
Gold importers in number one bullion consumer India were awaiting a bigger price correction in the precious metal on Friday, after it hit a series of record highs in rupee terms, denting Indian demand. "Demand is slow," Ketan Shroff, director at Pushpak Bullion, a wholesaler in Mumbai, said. "Everybody is eyeing that statement from Bernanke."
Silver was up 0.6 percent at $30.58 an ounce. It was on track for its biggest monthly rise in seven months, outperforming the other precious metals to climb nearly 10 percent. This may make it more vulnerable to losses that the others if Bernanke disappoints, analysts said.
Spot platinum was up 0.7 percent at $1,511.49 an ounce, while spot palladium was up 0.6 percent at $616.75 an ounce. Platinum, which has been lifted by worries about supply after as outbreak of violence in major producer South Africa as well as hopes for monetary easing, has risen 6.8 percent this month. Discussions between platinum miner Lonmin, unions and government to end a strike that has stopped production for more than two weeks have been suspended until Monday due to funerals for those killed in a labour fight, a union said on Friday.