BENGALURU - Gold rose 1 percent on Friday as the dollar fell after dovish comments from U.S. Federal Reserve officials raised doubts over the central bank's interest rate trajectory, while palladium hit a record high driven by concerns of a prevailing deficit.
Spot gold rose 0.7 percent to $1,221.37 an ounce by 10:35 a.m. EST (1535 GMT), having earlier risen 1 percent to its highest since Nov. 8 at $1,225.29. The metal was on track to gain about 1 percent this week, its biggest increase since the week ending Oct. 12.
U.S. gold futures gained 0.6 percent to $1,222.
The dollar fell to one-week lows against a basket of major currencies, burnishing bullion's appeal by making it cheaper, after two Fed officials cautioned about slowing global economic growth. [USD/]
"When you get people talking about the economy slowing down, they may not raise rates so quickly or as aggressively and that is bearish for the dollar," said INTL FCStone analyst Edward Meir.
Fed vice chair Richard Clarida's comments that the U.S. rates are nearing Fed estimates of a neutral rate, and being at neutral "makes sense," was seen as supportive for non-interest bearing gold.
Further support for the metal came from weaker global stocks markets. [MKTS/GLOB]
"Any significant downside price action in the U.S. stock indexes would more strongly support the safe-haven gold market," Kitco Metals senior analyst Jim Wyckoff said in a note.
Meanwhile, palladium rose 1.5 percent to $1,173.97 an ounce, having hit a record high of $1,185.40 earlier, putting the metal around $36 away from price of gold. It was on track for its biggest weekly gain since Sept. 21, up more than 5 percent since the start of the week.
"The market is in a big deficit. There is a lot of fund interest in palladium because the funds like to buy something when its moving... But the supply is of concern now," INTL's Meir said.
Used mainly in emissions-reducing auto catalysts for vehicles, palladium, the only precious metal on track for a gain for the year, was also helped by speculation of a stimulus to Chinese auto markets by Beijing.
"In the medium to longer term, I do not think these price levels are sustainable ... also assuming we do get some sort of stimulus in China that pulls more and more demand into the present and weighs on the future demand outlook for the Chinese car market," said Julius Baer analyst Carsten Menke.
Car dealers in the world's biggest car market have been pushing for Beijing to support the sector, including a proposal to cut the purchase tax on some smaller cars.
Silver was up 0.6 percent at $14.36 an ounce, on course for a weekly gain of over 1 percent. Platinum rose 0.7 percent to $847, but was down slightly for the week.