Gold has fallen, snapping a seven-day rally, as investors remained cautious ahead of comments from US 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 per cent after its longest winning stretch since August 2012.
Traders were awaiting Yellen's speech on monetary policy, scheduled for 1945 GMT (0645 Saturday AEDT) 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 per cent to $US1,203.98 an ounce by 2.36 pm EDT (0536 Saturday GMT). The metal jumped two per cent on Thursday to its highest since March 2 at $US1,219.40 in reaction to tensions in the Middle East.
US gold futures for April delivery fell $US5.00 to settle at $US1,199.80 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 US 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 six tonnes on Thursday to 737.24 tonnes, the lowest level since January.
Palladium lost three per cent to a five-and-a-half-month low of $US736.80 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 $US800 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 per cent at $US1,153.40 an ounce and silver fell 0.3 per cent to $US17.07 an ounce.
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