Gold prices edge lower as dollar firms

Bullion hit its highest since Oct. 31 on Tuesday at $1,332.10, having posted its biggest weekly gain since mid-August, of more than 4 percent, last week

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Gold prices edged lower on Friday and were on track to end the week little changed as rising U.S. yields and a firmer tone to economic data lifted the dollar, and with retail demand still crimped by the metal trading near 3-1/2 month highs.

Bullion hit its highest since Oct. 31 on Tuesday at $1,332.10, having posted its biggest weekly gain since mid-August, of more than 4 percent, last week.

Prices took support from a run of softer than expected U.S. data, which led to speculation that the Federal Reserve would slow the tapering of its bullion-friendly stimulus measures. However, well-received U.S. economic data on Thursday lifted the dollar, helping pull the metal down from its recent highs.

Spot gold was down 0.2 percent at $1,320.20 an ounce by 1025 GMT, while U.S. gold futures for April delivery were up $3.30 an ounce at $1,320.20.

“The news during the week has been mixed,” Saxo Bank's head of commodity research Ole Hansen said. “Traders who filled their boots on the break up are now getting a bit nervous.”

“The risk into next week is that we may need to check the strength of support, as any additional buying from these levels would need an event,” he said.

The dollar rose against a basket of currencies on Friday, on track for its first weekly gain in three weeks, boosted by higher U.S. yields and data that underpinned hopes for sustained economic strengthening.

The number of Americans filing new claims for unemployment benefits fell last week, suggesting the labour market continues to pick up steadily despite recent severe cold weather, while financial data firm Markit said U.S. manufacturing activity picked up pace to its fastest growth in nearly four years.

European shares also climbed, with France's CAC 40 hitting a 5-1/2-year peak, as investors took their lead from stronger equities on Wall Street and in Asia following robust U.S. factory data.

Asian demand wilts

Buying in Asia, a major demand centre for physical gold, remained light.

“Premiums on the Shanghai Gold Exchange continue to dwindle, trading as low as $2 yesterday over spot yesterday,” MKS Capital said in a note. “The declining physical demand out of China, alongside the continuing tapering by the Federal Reserve seems to be preventing the market breaking higher.”

Dealers saw purchases in the physical market this week, but many jewellers could be waiting for a correction. Premiums for gold bars were steady in Hong Kong and Singapore, but fell in Tokyo because of gains in Tokyo gold futures.

“I think (the price) is a little bit too high for Asians to buy gold because we've been below $1,300 for a long time and people bought a lot,” Yuichi Ikemizu, branch manager for Standard Bank in Tokyo, said.

The world's largest gold-backed exchange-traded fund, New York's SPDR Gold Shares, is on track for its first weekly outflow in four weeks, of 5.6 tonnes.

Among other metals, silver was down 0.3 percent at $21.74 an ounce, while spot palladium was little changed at $733.47 an ounce. Spot platinum bucked the trend to rise 0.4 percent to $1,415.74 an ounce.

Dealers said a violent attack in the turbulent, strike-hit platinum mining belt in South Africa lifted prices. A miner was killed by group of men at mine belonging to Anglo American Platinum, police said on Friday.

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