Gold prices regained some ground on Friday after a drop of nearly 3.0 per cent in the last session, but a firm dollar kept bullion on course for a weekly decline with the focus still on an upcoming US Federal Reserve meeting, report agencies.
Spot gold prices increased 0.7 per cent to $1,765.73 per ounce by 0925 GMT on the day, while US gold futures gained 0.6 per cent to $1,766.30 an ounce. Bullion slipped nearly 3.0 per cent on Thursday after an unexpected increase in US retail sales raised expectations that the Fed may reduce its stimulus sooner, which also drove a rally in the dollar.
The dollar held close to a near three-week peak on Friday, increasing gold's cost for buyers holding other currencies, and putting bullion on course for a 1.2 per cent decline this week.
"Everybody is watching the Fed like hawks. It would be very tempting after a $40 fall (to look for an entry point) despite the fact that the tapering debate is still going," StoneX analyst Rhona O'Connell said.
"Investors are going to scour Jay Powell's press conference for economic projections," O'Connell said, adding that a really hawkish shift from the Federal Open Market Committee (FOMC) would not stop the possibility of another knee-jerk downward reaction in gold even if it had been priced in already.
The FOMC meeting is due on September 21-22.
But the bounce in gold driven in part by short-covering "looks anaemic and gold faces another test of $,1750 as the dollar remains firm", said Jeffrey Halley, a senior market analyst for Asia Pacific at OANDA.
Unwinding of economic support measures not only dim gold's status as a safe haven but any subsequent increase in interest rates would translate to a higher opportunity cost of holding non-yielding assets like bullion.
Silver rose 0.7 per cent to $23.08 per ounce, after hitting its lowest in more than a month on Thursday.
Platinum rose 1.7 per cent to $948.66, while palladium gained 0.5 per cent to $2,043.29.
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