Gold climbs on weaker US dollar, lingering Evergrande risks

[BENGALURU] Gold prices rose on Friday due to a subdued US dollar and as investors avoided riskier assets because of China's Evergrande saga, but looming interest rate hikes slowed bullion's advance.

Spot gold was 0.4 per cent higher at US$1,750 per ounce by 5.50pm GMT but still on course for a third consecutive week of falls.

US gold futures settled up 0.1 per cent to US$1,751.70.

Although gold recovered some ground after Thursday's 1 per cent fall, OANDA analyst Craig Erlam expected gold to weaken again.

"We'll see a continuation of the downward trend driven by the Fed's stance, especially as some of the fears surrounding Evergrande have subsided," he said.

Gold slid to a one-month low on Thursday on expectations the US Federal Reserve could hike rates. But a weakening US dollar index on Friday offered support, making bullion cheaper for holders of other currencies.

"The Fed has announced that tapering is ahead, the next step is when it's implemented, that will push real rates even further up, and that should be negative for the gold," said UBS analyst Giovanni Staunovo, adding it would cause day-to-day volatility.

Cleveland Fed President Loretta Mester said on Friday the central bank should start reducing its support for the economy in November and could start raising interest rates by the end of next year should labour markets continue to improve.

A Fed rate hike would increase the opportunity cost of holding gold, which pays no interest.

Elsewhere, palladium fell 0.9 per cent to US$1,965.54 per ounce, and was on track for a third straight weekly decline.

Platinum slipped 1.2 per cent to US$976.85 per ounce, although the metal was set to rise on the week after two weekly falls.

Silver fell 0.6 per cent to US$22.35.