Gold prices have fallen after the US Senate approved a budget blueprint that paves the way for tax cuts, causing stocks, the dollar and bond yields to rise.
The Republican-controlled Senate voted by 51-to-49 late on Thursday for the measure, clearing a hurdle for tax cuts that would add up to $US1.5 trillion to the federal deficit over the next decade.
Investors betting on faster economic growth as a result bought riskier assets while bond holders reduced their positions on worries that inflation and federal borrowing could rise.
US Treasury yields rose further Friday afternoon, reversing a modest pullback after a White House official said Federal Reserve Chair Janet Yellen was in the White House for lunch with US President Donald Trump's economic adviser Gary Cohn.
Trump could announce his choice for the next chair of the US central bank as early as next week after he interviewed five candidates including Yellen.
A report on Thursday suggested Trump was leaning towards Fed Governor Jerome Powell, perceived as a less hawkish candidate.
Higher bond yields increase pressure on bullion because gold does not offer a yield, while a stronger dollar makes it more expensive for holders of other currencies.
Investors may also see tax cuts as a cause for higher US interest rates, said INTL FCStone analyst Edward Meir. Higher rates would push up bond yields and the dollar.
Spot gold was down 0.77 per cent at $US1,279.44 an ounce by 2.41 pm Friday EDT (0541 Saturday AEDT), down about 1.9 per cent on the week.
US gold futures for December delivery settled down $US9.50, or 0.7 per cent, at $US1,280.50 per ounce, 1.8 per cent lower on the week.
The net long position of money managers in Comex gold has fallen from a peak in early September but is still elevated.
"Right now, you could see a lot of open interest being abandoned if we don't have another big move (in gold) next week," said George Gero, managing director of RBC Wealth Management in New York.
The European Central Bank is expected to say on October 26 it will start trimming its monthly asset purchases to 40 billion euros from 60 billion euros in January, a Reuters poll showed.
In other precious metals, silver was down 1 per cent at $US17.02 an ounce, taking its fall this week to around 2 per cent.
Platinum was down 0.3 per cent at $US918.50 an ounce and palladium was up 1.5 per cent at $US972.80 per ounce. Both metals were down on the week.
