Gold prices inched up on Friday but were off a six-week high hit the previous day, with investors eyeing the US dollar and stocks for direction as growing recovery hopes fuel inflation concerns and boost bullion's appeal as a hedge.
Gold may also benefit from broad strength in commodities as investor risk appetite grows with the rally in equities markets.
Traders said activity was subdued but that they were looking at stock markets, oil prices, the US dollar and how overseas markets develop later in the day to determine whether gold can advance towards $US960 levels, which they said was the near-term resistance level.
"Risk appetite seems to have picked up quite a bit as seen in rising stock markets," said Adrian Koh, an analyst at Phillip Futures in Singapore.
"If we are looking at gold from a commodities point of view (including oil), then an increase in risk appetite could also support gold prices, as people would tend to buy riskier assets such as commodities," he said.
But if investors view gold as a safe-haven, then a rise in risk appetite would weigh on gold.
"But I guess the former is predominant for now," he said.
Spot gold edged up 0.2 per cent to $US948.80 per ounce in Asian trade, compared with New York's notional close of $US947.15 per ounce on Thursday.
At current levels, gold is set for a weekly rise of a little over 1 per cent, after hitting a six-week high of $US957.10 on Thursday.
US gold futures for August delivery slipped 0.6 per cent to $US949.00 per ounce in thin volume, compared with $US954.80 an ounce on the COMEX division of the New York Mercantile Exchange.
Gold futures ended above $US950 an ounce on Thursday as US existing home sales rose for a third straight month in June and prices hit their highest level since October, fuelling hopes that the housing sector is finally recovering and will help improve the broader economy.
The Nikkei average rose 1.5 per cent, following a rally in US stocks which surged on Thursday, driving the Dow industrials above the key 9000 mark for the first time since January.
Holdings at the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, were unchanged from the previous business day at 1086.61 tonnes.
Holdings have declined 47.42 tonnes or 4.2 per cent since hitting a record of 1134.03 tonnes on June 1.
Reuters