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Gold inches lower, on track for worst month this year

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

Spot gold declined 0.2 per cent to US$1,284.28 per ounce at 0434 GMT, on track to register a 2.8 per cent 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 per cent after prices rose in July and August.

US gold futures fell 0.1 per cent to US$1,287.70 per ounce.

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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 US 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," Mr 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 US and possibly in the UK and Europe," said INTL FCStone analyst Edward Meir.

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

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

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

Platinum lost 0.1 per cent to US$918.40 per ounce. The metal is set for a 7.1 per cent 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 Mr 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 per cent lower to US$16.80 per ounce and was on track to decline 4.4 per cent for the month but is set to gain 1.4 per cent for the quarter.

REUTERS