Spot prices are down 1.6 percent for the week so far, which would be its biggest decline since the week of Aug. 17.
“It is pretty clearly a dollar-related move today, which has happened since the latest decision from the U.S. Fed,” said Capital Economics analyst Ross Strachan.
The sentiment in the market “is quite cautious after recent spikes, consolidating in the $1,220 to low $1,230 levels and not breaking out of that,” he said.
Spot gold touched a peak of $1,243.32 on Oct. 26, its highest since mid-July.
The dollar firmed towards a 16-month peak on Friday, underpinned by a robust U.S. economy and a rising interest rate environment, making bullion more expensive for holders of other currencies.
Rate increases also pressure gold prices by increasing the opportunity cost of holding non-yielding bullion.
“We remain cautious on gold here as roughly half the recent advance seems to have been rolled back in recent days on account of a stronger dollar and more resiliency in U.S. equity markets,” said INTL FCStone analyst Edward Meir in a note.
“In addition, U.S. interest rates seem to be on the march again,” he added. “There is not much of an upside trigger that could lead to a sustainable rally.”
The Fed indicated on Thursday that it remained on track to keep gradually tightening borrowing costs after hiking rates three times this year, with another increase expected in December.
“We are expecting the current Fed tightening cycle to end… by the middle of next year,” Strachan said, “So we are expecting gold prices to rise to $1,300 by the end of next year.”
Among other precious metals, silver dropped 1.60 percent to $14.18 per ounce. The metal was headed for its biggest weekly percentage decline in 12 weeks, slipping more than 3 percent so far.
Platinum dipped 1.23 percent to $853.49 an ounce. The metal was down 1 percent so far for the week, its biggest fall since late September.
Palladium fell 0.56 percent to $1,117.80 per ounce.
The VanEck Vectors Gold Miners ETF (GDX) was trading at $18.85 per share on Friday afternoon, down $0.53 (-2.73%). Year-to-date, GDX has declined -18.89%, versus a 4.28% rise in the benchmark S&P 500 index during the same period.
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