Gold price: another month high, now set to tumble?

Platinum clawed back some ground lost from a four-day rout on fears about demand from the vehicle sector following the Volkswagen emissions scandal.

Spot gold had fallen 0.7% to $1,146.15/oz by 3.43am GMT, below a one-month high of $1,156.30 reached on Thursday.

“The Japanese came in aggressively on the bid this morning, taking the white metal more than $US20 higher”, said MKS Group trader Jason Cerisola. The projections released along with the statement suggest a few Fed members want to delay raising rates into next year, although most still continue to predict a rate hike by the end of 2015.

St. Louis Fed President James Bullard and Atlanta Fed President Dennis Lockhart indicated in separate remarks that the USA central bank is still likely to raise short-term interest rates this year. The metal, which fell to a six-and-a-half-year low earlier on Wednesday, was on track for its biggest weekly drop since mid-July.

Investor will look for further clues on the central bank’s plans when Fed Chair Janet Yellen delivers a speech Thursday in Amherst, Mass. Higher rates curb the appeal of the metal, which doesn’t pay interest or give returns like competing assets such as bonds and equities. Gold prices were also falling because the stronger dollar is weighing it down, and even Platinum fell to a six-and-a-half-year low.

The precious metal had recently benefited from the Fed’s announcement that it is standing pat on the interest rates, with the global price rising to a near three-week high of $1,141.50 last week.

Volkswagen AG, the world’s biggest carmaker by sales, admitted to US regulators that it programmed its cars to detect when they were being tested and alter the running of their diesel engines to hide their true emissions.

Analysts said dollar-dominated gold edged higher as USA dollar went down against other major currencies.

Coupled with uncertainty in China that should add to the allure of gold, a traditional safe haven, this could point to at least a modest recovery, some say.

“Gold prices have risen sharply of late, in part supported by the Fed’s decision to leave the federal funds rate unchanged”, FastMarkets analyst Boris Mikanikrezai said.