Gold rush? Price on track for biggest weekly gain since 2013

Gold rose to a four-month high on Friday and was set to increase 4.5 percent for the week, its biggest weekly gain since August 2013, as investors sought safety from volatility in wider markets after Switzerland unexpectedly abandoned a cap on the franc.

Spot gold was up 1.3 percent at $1,277.16 an ounce at 2:27 p.m. EST (1927 GMT), after touching a four-month high of $1,281.50 earlier in the day. On Thursday, the metal rose 2.6 percent, the most in six weeks, after the Swiss National Bank's move.

U.S. gold futures for delivery in February settled up 1 percent at $1,276.90 an ounce, after a 2.5 percent rally on Thursday.

Spot silver rose 4.6 percent to $17.65 an ounce, after surging 5.5 percent to $17.81, the highest since Sept. 24.

Gold's move higher came despite a dollar up 0.5 percent against a basket of major currencies, which would normally limit gains by the metal.

"The SNB announcement has added a bit of an extra juice to the gold story but from an interest rates and equity perspective it looks like there is a more solid foundation to its strength," Deutsche Bank analyst Michael Lewis said.

Global shares steadied after Thursday's volatility, while the yield on the benchmark 10-year U.S. Treasury remained near its lowest since May 2013. Low yields reduce the cost of holding non-interest bearing gold.

Dealers assumed that the SNB had moved with the knowledge that the European Central Bank would take the plunge into full scale quantitative easing at its policy meeting on Jan. 22.

"We are not going to have a huge ramp-up in short-term interest rates from the Federal Reserve and the market is trying to price in the possibility of QE by the ECB," said Bart Melek, head of global commodity strategy for TD Securities in Toronto, referencing quantitative easing and the European Central Bank.

In a reflection of improving investor confidence, holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 1.35 percent to 717.15 tonnes on Thursday.

Physical demand, however, suffered a setback with the higher prices putting off buyers in Asia. Premiums on the Shanghai Gold Exchange fell to $1 to $2 an ounce over the global benchmark, from about $3 to $4 in the previous session, indicating softer demand.

Platinum rose 0.6 percent to $1,261.80 and palladium slipped 1.6 percent to $751.00 an ounce.