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* Gold set for weekly drop after hitting 1-month low
* Traders await direction from Fed meet next week
* Stock markets head for best week in eight
By Jan Harvey
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 2 percent this week, and touched their
weakest level since August 11 at $1,099.05 an ounce on
Wednesday.
Spot gold was down 1 percent at $1,100.40 an ounce at
1344 GMT, while U.S. gold futures for December delivery
were down $9.60 an ounce at $1,099.70.
Traders are awaiting the Fed's next policy statement on
Sept. 17 for clues on the timing of a U.S. interest rate rise,
before taking any big positions in gold.
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 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 edged up 0.1 percent against a basket of
currencies on Friday. Global stocks slipped into the red but
remained on track for their biggest weekly gain in eight as
investors grappled with the possibility of U.S. interest rates
rising next week.
Physical gold demand among the major Asian consumers was
relatively soft. Gold closed the week in a quiet fashion
overnight in Asia, MKS said in a note, supported by modest
Chinese demand but holding a tight range.
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.
"A drop below $1,100 an ounce may elicit greater physical
demand," HSBC said in a note.
Silver XAG= was down 2 percent at $14.37 an ounce, while
platinum XPT= was down 1.7 percent at $961.74 an ounce and
palladium XPD= was down 1.4 percent at $579.47 an ounce.
Palladium has been the best-performing precious metal this
week, rising 1.4 percent to snap three weeks of losses.