The dollar's strength led to a 3.3 percent drop this week in gold, roughly matching the metal's last significant weekly decline since July.
Gold stabled on Friday after its first weekly decline in nearly 3 months, with bullion investors keeping an eye on any statements from the G20 meeting.
Any currency reaction to the G20 meeting in
this weekend could provide fresh momentum to the gold market. South Korea
Analysts, however, said it is unlikely for members to reach a deal on a U.S.-led initiative for a commitment from emerging economies to allow their currencies to rise.
"I don't think there was an expectation that they will come up with a grand solution because everybody does have a different interest," said Axel Merk, portfolio manager of Palo Alto, California-based Merk Mutual Funds.
"It's just the very beginning of a currency war. It's going to take a while to brew over. I have no doubt gold will be the beneficiary in the long run," he said.
Gold was more than 3 percent lower this week, after
's surprised rate hike sent the dollar up 0.7 percent since Monday. The inverse correlation between gold and the dollar has been the closest in a month, Reuters data showed. China
Spot gold was up slightly at $1,323.81 an ounce at 1:44 p.m. EDT, having earlier fallen to a 2-1/2 low at $1,315.09.
gold futures for December delivery fell $1.30 an ounce to $1,324.30. U.S.
The dollar was on track to snap a five-week losing streak against major currencies as traders took profits ahead of possible news from the G20 meeting and the euro repeatedly ran into technical resistance above $1.40.
Standard Chartered analyst Daniel Smith said the dollar has been a very important driver and gold could see more weakness in the short term.
"I think the price has run up too fast and we're just going through a period of consolidation now," Smith said.
Spot prices rallied sharply to a record $1,387.10 an ounce late last week but have struggled to maintain traction as the dollar rebounded from lows amid fears expected
monetary easing had been too heavily priced into the market. U.S.
Although significant action is not widely anticipated, traders are awaiting a forthcoming Fed policy meeting that could result in further quantitative easing.
Good physical demand from traditional bullion-buying centers such as
is strengthening as prices descend. India
reported they were continuing to stock up for forthcoming festivals, including the Hindu festival of Diwali, a major gold-buying events, as prices corrected this week. India