(Updates prices; adds comment, second byline, NEW YORK
dateline)
* Gold set for weekly drop after hitting one-month low
* Traders await direction from Fed meet next week
* Stock markets head for best week in eight
By Marcy Nicholson and Jan Harvey
NEW YORK/LONDON, Sept 11 (Reuters) - Gold fell to a
one-month low on Friday, heading for a third successive weekly
loss, as uncertainty over the timing of the U.S. Federal
Reserve's first interest rate increase in nearly a decade
weighed on appetite for the metal.
Prices are down nearly 2 percent this week, and touched
their weakest level since Aug. 11 at $1,098.35 an ounce.
Spot gold XAU= was down 0.6 percent at $1,104.96 an ounce
at 2:37 p.m. EDT (1837 GMT), while U.S. gold futures GCv1 for
December delivery settled down 0.5 percent at $1,103.30 an
ounce.
Traders are awaiting the Fed's next policy statement on
Thursday for clues on the timing of a U.S. interest rate rise
before taking any big positions in gold.
"People don't want to be positioned long gold going into the
meeting, more than anything else," said Bill O'Neill, co-founder
of commodities investment firm Logic Advisors in New Jersey,
adding that there is "an erosive market tone".
"The market remains a very low participation market from the
big players. The hedge funds certainly are not looking to make
major commitments in gold," O'Neill said.
Gold has benefited in recent years from ultra-low rates,
which cut the opportunity cost of holding non-yielding bullion
while weighing on the dollar, in which it is priced.
Concerns over slowing economic growth in China, mixed
economic data and volatility in financial markets have increased
uncertainty about the timing of any U.S. rate increase, which
had been expected as early as this month.
"Our house view is that they will wait until December,"
Commerzbank (XETRA:CBKG) analyst Daniel Briesemann said. "I think that will
lead to continued uncertainty in the gold market. The market
would be in better shape if the Fed said clearly next week what
it was going to do."
The dollar .DXY fell 0.3 percent, while global equity
markets slid on worries over the economic outlook. MKTS/GLOB
Two straight years of drought in India - for only the fourth
time in over a century - have hit gold demand there and could
cut imports by up to 10 percent in 2015, the head of a southern
Indian regional gold federation said. ID:nL4N11G2T5
Silver XAG= was down 1.2 percent at $14.49 an ounce, while
platinum XPT= was down 1.9 percent at $959.50 an ounce and
palladium XPD= was flat at $587.50 an ounce.
Palladium has been the best-performing precious metal this
week, rising 2.7 percent to snap three weeks of losses.