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CHICAGO, March 3 (Xinhua) -- Gold futures on the COMEX division of the New York Mercantile Exchange fell on Friday as the U.S. Federal Reserve Chairwoman Janet Yellen provided additional hints on a possible interest rate increase.
The most active gold contract for April delivery fell 6.4 U.S. dollars, or 0.52 percent, to settle at 1,226.50 dollars per ounce.
The market focused on Yellen's speech at the Executives' Club of Chicago, as she said that the March Federal Open Market Committee (FOMC) meeting may see action on the interest rate.
Investors now believe the Fed may raise rates from 0.75 to 1.00 during the March FOMC meeting. According to the CME Group's Fedwatch tool, the current implied probability of a hike from 0.50 to at least 0.75 is at 82 percent at the March meeting and 75 percent for the May meeting, along with a nine percent chance of an increase to a 1.0 rate.
The Fed's goal is to control inflation and promote employment. Analysts believe Fed intends to soak up some of the banks' 2.5 trillion U.S. dollars of excess reserves as the U.S. economy continues to recover. Banks become more willing to take risks in a bullish economy, and as a result could potentially release some of their excessive reserves, flooding the economy with cash, causing inflation, which the U.S. Federal Reserve seeks to control.
A fall in the U.S. dollar prevented the precious metal from falling further. The U.S. Dollar Index fell by 0.65 percent to 101.49 as of 1900 GMT. The index is a measure of the dollar against a basket of major currencies. Gold and the dollar typically move in opposite directions, which means if the dollar goes up, gold futures will fall as gold, measured by the dollar, becomes more expensive for investors.
Gold was put under pressure as a report released by the U.S.-based Institute for Supply Management showed its ISM non-manufacturing index increasing by 1.1 points during the month of February, a figure which was better-than-expected and dampened demand for the precious metal.
Traders are looking to next week for the factory orders report on Monday, international trade report on Tuesday, weekly jobless claims report on Thursday, and big jobs report on Friday.
Silver for May delivery dropped 0.8 cents, or 0.05 percent, to close at 17.74 dollars per ounce. Platinum for April delivery added 4.2 dollars, or 0.42 percent, to close at 994.10 dollars per ounce.
