Gold heads for first weekly loss in five on Fed taper jitters

Gold prices were headed for their first weekly decline in five on Friday as bullion's appeal was dented by US dollar strength and growing jitters over the Federal Reserve's timeline to start tapering asset purchases.

Spot gold rose 0.1 per cent to $1,796.77 per ounce by 0428 GMT as the dollar pulled back slightly. It was down 1.6 per cent for the week.

US gold futures were flat at $1,799.20.

The greenback was headed for a weekly gain of 0.4 per cent after two weeks of decline.

"The overall backdrop for gold is much more bearish... We're increasingly starting to hear from Fed officials a level of comfort in maybe announcing the taper formally at this month's meeting," said DailyFX currency strategist Ilya Spivak.

"If the CPI number comes in on the hot side it will reinforce the sense that this might be the month."

A number of Fed officials said this week the August slowdown in job growth would not throw off the central bank's plans to reduce asset purchases this year, though some cautioned a final decision requires more data.

The number of Americans filing new claims for jobless benefits fell last week to the lowest level in nearly 18 months, data showed on Thursday.

Gold is viewed as a hedge against inflation and currency debasement. The Fed's tapering would tackle both those conditions, diminishing gold's appeal.

"We believe bullion prices should head lower in 4Q, finding a new home closer to $1,700," Citi Research said in a note.

Silver rose 0.3 per cent to $24.14 per ounce but was down 2.1 per cent for the week.

Platinum was steady at $977.50. It was headed for its biggest weekly decline since early August, falling 4.5 per cent .

Palladium rose 1.9 per cent to $2,220.00 but was down over 8 per cent for the week.