Gold edged down on Friday, heading for its first weekly decline in more than a month as stock markets gained, but bargain hunting could cushion the fall, with sentiment in the financial markets still fragile.
Gold hit a two-month high above $US1262 an ounce this week on renewed global economic concerns before losing some gains to profit taking and better-than-expected US data on jobless benefits. Silver was also off its highest since early 2008.
Spot gold fell $US3.17 an ounce to $US1245.10 an ounce, after falling as low as $US1242.20 on Thursday, partly driven by technical selling from recent highs. Bullion, which struck record around $US1264 in June, is headed for a weekly drop of 0.2 per cent, its first in six weeks.
"The trend still remains for a stronger gold and it probably looks to test $US1275," said Darren Heathcote, head of trading at Investec Australia in Sydney.
"But for the time being, there's a bit of safe-haven unwinding going on overnight as risk is back on following stronger US data."
US gold futures for December delivery dropped $US3.7 to $US1247.2 an ounce. The all-time high on the December futures chart sits at $US1270.60 per ounce.
The International Monetary Fund said on Thursday it sold 10 metric tonnes of gold to the central bank of Bangladesh on Sept. 7, using Tuesday's market prices for the transaction.
Asian stocks hit a four-month high today as some investors were inspired by positive US and Japanese economic data to pick out bargains but worries about the health of European banks lingered.
The euro, which was recently pummeled after traders seized on resurging fears about Europe's fiscal health as an excuse to sell the currency, was a touch softer on the US dollar at $US1.2682.
"People sell gold to buy stocks. I don't think sentiment is bearish but it's a thin market, which gives gold no direction," said a dealer in Hong Kong. "There's a drop in ETF holdings but it's less than a tonne."
The world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings slipped to 1293.531 tonnes by Sept 9 from 1,294.442 tonnes by Sept 3. The holdings hit a record at 1320.436 tonnes on June 29.
The world's largest silver-backed exchange-traded fund, the iShares Silver Trust, said its holdings rose to 9307.17 tonnes by Sept 9 from 9276.73 tonnes on Sept 3.
"Silver has been lagging behind gold for a while. So it doesn't surprise me to see a bit of demand coming in," said another dealer. "It's sort of a bit of a catch up and the spread between gold and silver has been widening over the last few weeks."
But physical dealers said the rise in silver prices to above $US20 this week was driven by speculative buying and not by purchases from the industrial sector.
In the energy market, US crude for October jumped to near $US75 after a leak forced Enbridge to shut down the biggest pipeline supplying Canadian oil to refineries in the Midwest.
Reuters