Gold edged lower on Friday amid uncertainty over the U.S. Federal Reserve's tapering timeline that kept most investors on the sidelines, with gains in the dollar this week putting bullion on course to mark its first weekly decline in five.
Spot gold fell 0.2% to $1,790.37 an ounce by 1:46 p.m. EDT (1746 GMT), while U.S. gold futures settled 0.4% lower at $1,792.1 an ounce.
Bart Melek, head of commodity strategies at TD Securities, said a bounce in U.S. yields were preventing speculative funds from convincingly moving into gold.
The benchmark U.S. 10-year Treasury yield rose after economic data indicated high inflation could persist for some time. While gold is considered a hedge against inflation, higher yields translate into higher opportunity cost for holding non-interest bearing bullion.
"The elevated U.S. producer price index data could on margin drive people to believe that the Fed could show slightly less accommodation down the road with tapering," Melek added.
Gold investors closely monitor the Fed's decisions, since non-yielding bullion tends to gain when interest rates are low.
Many gold market participants are waiting on the sidelines in part due to the uncertainty surrounding the Fed's tapering timeline, said Commerzbank analyst Daniel Briesemann.
Silver fell 0.9% to $23.86 per ounce, while platinum dropped 1.9% to $958.51 per ounce, both set for weekly losses.
Palladium fell 1.7% to $2,142.12 per ounce, and was down about 11% for the week.
TD Securities' Melek noted that increasing concerns over automobile manufacturing in China and elsewhere, with announcements from automakers shuttering some production due to chip shortages, have pushed demand for auto-catalysts platinum and palladium lower this week.
(Reporting by Bharat Govind Gautam and Arundhati Sarkar in Bengaluru; Editing by Shailesh Kuber and Vinay Dwivedi)
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