Gold inches lower, on track for worst month this year

Gold fell on Friday, inching towards the previous session’s six-week low as the dollar strengthened, with prices set for their biggest monthly fall this year.

Spot gold declined 0.2 percent to $1,284.28 per ounce at 0434 GMT, on track to register a 2.8 percent decline in September, the largest monthly fall so far in 2017 and the biggest monthly drop since November.

However, it was set to end the quarter up around 3.5 percent after prices rose in July and August.

U.S. gold futures fell 0.1 percent to $1,287.70 per ounce.

Gold is mostly being influenced by the dollar’s movements in an otherwise quiet session, said Yuichi Ikemizu at ICBC Standard Bank in Tokyo.

The dollar rose against a basket of major currencies on Friday. The greenback pulled back from a one-month high reached earlier on Thursday as investors this week were supportive of the Trump administration’s tax plan and the outlook for Federal Reserve policy.

“As long as nothing happens on the North Korea front, I guess we’ll have a pretty quiet Friday,” Ikemizu said.

Russian and North Korean officials will meet in Moscow on Friday to discuss the North Korea crisis.

“(Gold) will likely continue to struggle in the short term against a backdrop of higher interest rates, particularly in the U.S. and possibly in the U.K. and Europe,” said INTL FCStone analyst Edward Meir.

Proposed U.S. tax reforms and strong economic data that supported the case for another U.S. interest rate hike this year have weighed on gold.

Gold is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion, while boosting the greenback.

Meanwhile, palladium gained 0.7 percent to $935.05 per ounce. It was up 11 percent for the quarter and 38 percent so far in 2017.

Platinum lost 0.1 percent to $918.40 per ounce. The metal is set for a 7.1 percent drop for September, its worst performing month since March.

Palladium traded at a premium to platinum for a third straight day after prices for the two metals hit parity for the first time since 2001 on Wednesday.

“Palladium is short-supplied and also there’s very good demand from auto sectors. As long as this situation continues, we’ll see a palladium premium,” said Ikemizu.

“If it goes on for a long time, car makers will have to switch from palladium to platinum, which was unthinkable in the past…(However) This current reversal probably won’t be long enough for car makers to decide on substitution.”

Both metals are primarily consumed by automakers for catalytic converters, but platinum is more heavily used in diesel vehicles that have fallen out of favour.

Meanwhile, silver edged 0.2 percent lower to $16.80 per ounce and was on track to decline 4.4 percent for the month but is set to gain 1.4 percent for the quarter.