Investing.com - It had to be one safe-haven or the other and the dollar triumphed at the expense of gold on Friday as signs of slowing growth in China sparked risk aversion across the globe.
A contrarian trade to bullion, the dollar hit 19-month highs after Beijing's weakest retail sales performance in 15 years and smallest industrial output in almost three years cast doubts about demand in the No. 2 economy. Investors retreated from equity markets all over, putting Wall Street's S&P 500 on track to a second weekly loss.
Benchmark COMEX gold futures for February settled down $6, or 0.5% at $1,241.40 per troy ounce. For the week, it was down almost 1%, its largest weekly loss in five.
The Dollar Index, which measures the greenback against six major currencies, was up 0.4% at 97.46 by 1:45 PM ET (18:45 GMT) after racing earlier to a May 2017 high of 97.715.
"The Wall Street gold traders I keep in touch with indicated they are all out of the gold market at this time, after being long from the $1,232 spot level and cashing out for the most part around the $1,240 level, as the dollar was seen gaining momentum," said Walter Pehowich, executive vice-president at Dillon Gage Metals in Addison, Texas.
After a sluggish start to December, the dollar has picked up steam in recent days ahead of next week's Federal Reserve policy meeting, where investors widely expect the central bank to announce a fourth rate hike for the year.
Investing.com's Fed Rate Monitor Tool has priced in a 79.2% chance of the central announcing a 2.00%-2.25% hike at the conclusion of its Dec. 19 policy meeting.
If that does take place, many also believe the Fed will pause on further hikes in the new year until there's proof the economy is doing well enough to spur inflation. For now, dovish signals from various central bank speakers suggest the Fed isn't convinced that data at hand warrants further tightening.
"We think there is a possibility that the days of the dollar’s reign as King of FX could be numbered" after the December rate hike, said Fawad Razaqzada, technical analyst for forex and commodities at forex.com in London.
Such an outcome could be a boon for gold in the new year, especially with the fears abound over Brexit and a possible ouster of UK Prime Minister Theresa May due to the unpopularity of her divorce draft for U.K. from the European Union.
"One thing is for sure, we are closer to the time when gold either breaks up-and-out or down-and-splash. We’ll be watching!" Mike Hammer, author of "The Gold Enthusiast" blog said on Friday.
In the trade of other precious metals on COMEX on Friday, silver slipped by 1.3% to $14.83 per ounce.
Palladium retreated by 1.9% to $1,168.40 per ounce, while sister metal platinum slipped 1.1% to $788.60.
In base metals, COMEX copper fell 0.3% to $2.76 per pound.