London: Gold prices held at slightly firmer levels on Friday as investors awaited US economic data that was expected to give more clues about a possible interest rate hike in December.

Spot gold was up 0.1% at $1,288.25 per ounce by 3.16pm. US gold futures rose 0.2% to $1,291 per ounce.

Spot gold was on track to register a 2.5% decline in September, its largest monthly fall so far in 2017 and the biggest since November 2016, after the dollar strengthened on the back of better-than-expected US economic data.

However, it was set to end the quarter around 3.7% higher as it rallied in July and August, partly due to geopolitical tensions including North Korea’s missile tests.

Investors would keep an eye on the US personal consumption expenditures (PCE) price index for August, due at 6.00pm.

“If we get a negative print, then we could see rates fall, the dollar fall back and gold rise on that, but if we get a number in line with expectations or slightly above that, then it’s not likely to do much," said Jens Pedersen, senior analyst at Danske Bank in Copenhagen. “It’s difficult for the market to price in more since we’re already at 70% and there’s still a couple of months to go."

Fed funds futures now imply around a 73% chance of a rate hike at the 12-13 December policy meeting, sharply higher than just a few weeks ago.

Gold is highly sensitive to rising US interest rates, which increase the opportunity cost of holding non-yielding bullion, while boosting the greenback.

Meanwhile, palladium gained 0.6% to $934.75 per ounce. It was up 11% for the quarter and 38% so far in 2017. Platinum rose 0.3% to $921.85 per ounce. The metal is set for a 7.1% drop for September, its worst performing month since March.

Palladium traded at a premium to platinum for a third straight day after prices for the two metals hit parity for the first time since 2001 on Wednesday. “Palladium is short-supplied and also there’s very good demand from auto sectors. As long as this situation continues, we’ll see a premium in palladium ," said Yuichi Ikemizu at ICBC Standard Bank in Tokyo.

Both metals are primarily consumed by automakers for catalytic converters, but platinum is more heavily used in diesel vehicles that have fallen out of favour. Highlighting investors’ bullish attitude to the metal, palladium ETF holdings showed the first quarterly inflow since the second quarter of 2015.

Meanwhile, silver slipped 0.2% higher to $16.80 per ounce and was on track for a 4% loss on the month, but was set to end the quarter 1.7% higher. Reuters

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