Gold heads for worst week in four months

London - Gold headed for the biggest weekly slump since November as renewed prospects for higher US interest rates boosted the dollar and cut the metal’s appeal as an alternative investment.

Bullion has dropped 3.1% this week and touched the lowest in a month as a gauge of the dollar rebounded from the weakest level since July. While the Federal Reserve recently cut its projection for this year’s rate increases, regional officials have indicated support for a raise as soon as April.

Traders are pricing in a 70% chance that the Fed will raise borrowing costs by year-end. That’s a big turnaround from a month ago, when the probability was seen at just 45%. Reduced expectations for a move had pushed the dollar down and helped drive gold to the highest price in a year earlier this month.

“The dollar is still the most crucial driver for gold,” said Georgette Boele, a strategist at ABN Amro Group NV in Amsterdam and who expects the metal to climb to $1 370 an ounce by year-end. “Short term sentiment is a bit negative for the metal.”

Gold for immediate delivery lost 0.1% to $1 218.55 by 12:47, according to Bloomberg generic pricing. Prices dropped 2.3% on Wednesday, the most since mid- February.

Fed Bank of St. Louis President James Bullard said yesterday that a move may be warranted next month amid a broadly unchanged economic outlook and prospects of inflation and unemployment exceeding targets. That echoes similar comments by other regional presidents earlier this week.

Investors keep buying the metal through exchange-traded products. Holdings rose for a seventh day to 1 768.1 metric tons on Wednesday, the highest since March 2014, according to data compiled by Bloomberg.

In other metals:

* Silver was little changed at $15.287 an ounce after earlier falling to the lowest March 4.

* Platinum fell for a second day, dipping 0.7% to $952.70 an ounce.

* Palladium lost 0.4% to $579.25 an ounce.