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Gold fell on Friday, snapping a seven-day rally as investors remained cautious ahead of comments from U.S. Federal Reserve Chair Janet Yellen, but the metal still looked set to post its second straight weekly gain.
Despite Friday’s losses, gold was on track to finish the week up around 1.5 percent after its longest winning stretch since August 2012.
Yellen will speak in San Francisco on monetary policy in a speech scheduled for 1945 GMT and traders will be listening for clues on when the Fed may begin tightening monetary policy.
“Yellen … has been accused of being too dovish and maybe she wants to react to that by making her speech sound a little bit less dovish,” Saxo Bank senior manager Ole Hansen said.
Spot gold eased 0.4 percent to $1,203.98 an ounce by 2:36 p.m. EDT (1836 GMT). The metal jumped 2 percent on Thursday to its highest since March 2 at $1,219.40 in reaction to tensions in the Middle East.
U.S. gold futures for April delivery fell $5.00 to settle at $1,199.80 an ounce.
Saudi Arabia and its allies launched air strikes in Yemen this week, rattling wider markets and supporting gold, usually seen as an insurance against risk. But even oil prices turned lower as fears eased about any disruption of Middle East crude shipments due to the Yemen conflict.
“Geopolitics has never been something that could set a trend in gold prices, it only causes a short-term deviation from the existing trend,” Julius Baer head of commodity research Norbert Ruecker said.
Gold had gained strength after the Fed sounded cautious at its policy meeting last week about the pace of any interest rate increase, prompting the dollar to fall from multi-year highs.
Investor caution over the price rally was evident as SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, continued to post outflows. Holdings fell nearly 6 tonnes on Thursday to 737.24 tonnes, the lowest level since January.
Palladium lost 3 percent to a 5-1/2-month low of $736.80 an ounce.
Mike Dragosits of TD Securities in Toronto said in a note that vehicle sales in China are expected to increase. The bank forecast palladium prices at $800 an ounce in the second quarter.
“Since each new vehicle sold in China is a major demand driver for palladium, in the catalytic converter, we would suggest that the downturn in prices for the metal is near a bottom,” he wrote.
Platinum was down 1.6 percent at $1,153.40 an ounce and silver fell 0.3 percent to $17.07 an ounce.