Gold rose as much as 1 percent on Friday as the dollar fell after US Federal Reserve officials made cautions comments that fed doubt about the outlook for interest rate hikes, while palladium hit a record high driven by worries about short supplies. Spot gold rose 0.7 percent to $1,221.04 an ounce by 12:05 p.m. EST (1705 GMT). The session high was the highest since Nov. 8 at $1,225.29. Gold was on track to gain about 1 percent this week.
US gold futures gained 0.5 percent to $1,221.50. Two Fed officials cautioned that global economic growth was slowing and the dollar fell to one-week lows against a basket of major currencies, making bullion cheaper for buyers using other currencies.
"When you get people talking about the economy slowing down, they may not raise rates so quickly or as aggressively and that is bearish for the dollar," said INTL FCStone analyst Edward Meir. Palladium climbed 1.7 percent to $1,176.70 an ounce, up more than 5 percnt since the start of the week. The metal hit a record high of $1,185.40 during the session, within a whisker of parity with gold for the first time in 16 years.
"The market is in a big deficit. There is a lot of fund interest in palladium because the funds like to buy something when its moving... But the supply is of concern now," INTL's Meir said.
"In the medium to longer term, I do not think these price levels are sustainable ... also assuming we do get some sort of stimulus in China that pulls more and more demand into the present and weighs on the future demand outlook for the Chinese car market," said Julius Baer analyst Carsten Menke.
Silver rose 0.3 percent at $14.33 an ounce, on course for a weekly gain of over 1 percent. Platinum was up 0.1 percent at $841.49, but was down slightly for the week.