Gold prices inched above $US940 to a near one-week high, as firmer oil prices supported bullion's appeal as a potential hedge against oil-led inflation.
The precious metal has gained about 1 percent this week after touching a six-week low on Tuesday, a point traders said was a consolidation level.
Gold's upside may be tested next week as sentiment has improved, with the US dollar losing its upward momentum and commodities rising, while there are still some fears that inflation will continue, traders said.
"There is some bullish sentiment in the market and prices may move higher next week," said a Hong Kong-based banker.
"The dollar is weakening while commodities are rising, and there are some worries that interest rates may rise. Inflation concerns could push up gold," the manager said.
Spot gold rose to a high of $US942.50 per ounce, up 0.4 per cent from New York's notional close of $US938.55, and near a one-week high.
Gold prices turned around after falling to a low of $US912.90 on Tuesday, their lowest in six weeks, suggesting the market has confirmed a floor for now, the manager said.
US gold futures for August delivery rose 0.3 per cent to $US942.00 per ounce, compared with $US939.50 an ounce on the COMEX division of the New York Mercantile Exchange.
Oil prices extended gains above $US70 a barrel on Friday, after jumping 2.3 per cent the previous day on renewed rebel attacks against oil facilities in Nigeria and worries that a glitch at the largest US oil refinery could tighten gasoline stockpiles this summer driving season.
In addition to gains in oil prices, the US dollar's fall benefited bullion, which is often viewed as insurance against the falling value of investors' dollar-denominated assets.
The US dollar dropped against a basket of currencies on Friday, extending losses made the previous day as investors shifted funds back into risky assets, with the Federal Reserve this week appearing to confirm it will keep interest rates low for a while.
Just as the spot market was confined to narrow ranges, inflows into gold-backed exchange-traded funds waned.
Holdings at the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, fell 0.5 per cent to 1,125.74 tonnes as of June 25, down 5.5 tonnes from the previous business day.
Reuters
