London: Gold edged lower on Friday as shares rebounded, but it was still set for a second straight weekly gain as concerns over the global economy have raised speculation the US Federal Reserve could keep interest rates low for longer.
Spot gold was down 0.1 percent at USD 1,237.40 an ounce by 1145 GMT. The metal is up about 1.4 percent for the week after reaching a one-month high of USD 1,249.30 on Wednesday.
U.S. gold futures were down USD 3.50 an ounce at USD 1,237.70.
"There has been a move down in the dollar and equities this week, but in comparison the upside in gold has been relatively modest," ABN Amro analyst Georgette Boele said.
"People are still cautious on gold. They buy it when there is some risk aversion, but in the end when wider sentiment improves you see the metal struggle."
European stocks clawed back some of this week`s losses on Friday after solid U.S. data on Thursday calmed turbulence in global financial markets, though underlying worries about slowing world growth kept investors on edge.
The dollar was down 0.2 percent versus a basket of currencies and was on course for its biggest two-week loss since September 2013 after Fed officials warned at the weekend that if the global recovery stumbled, the bank could delay an increase in U.S. interest rates.
Bets had been rising that the Federal Reserve would raise rates in mid-2015.
The market will focus on a speech by Fed chair Janet Yellen due later on Friday.
Gold has benefited from the low interest rates and increased central banks` liquidity that have prevailed in the years after the 2008 financial crisis.
On Thursday, the head of the St. Louis Federal Reserve Bank, James Bullard, said the central bank may want to keep up its bond-buying stimulus for now, given a drop in inflation expectations.
As a gauge of investor interest, SPDR Gold Trust, the world`s largest gold-backed exchange-traded fund, said its holdings rose 0.2 percent to 760.94 tonnes on Thursday.
In top buyer China, premiums recovered slightly to USD 2-USD 3 an ounce from USD 1-USD 2 overnight, indicating higher demand and supporting global prices.
PLATINUM, PALLADIUM REBOUND
Among other precious metals, platinum and palladium rebounded from heavy losses on Thursday.
Both metals have slid due to concerns about global growth and weak equity markets, HSBC said in a note. But the lower prices could also lead physical buyers to look for bargains.
"Although we saw no evidence of industrial or end-user buying on Thursday`s price drop, we anticipate that physical buying will materialize should the market decline further," it said.
Platinum was up 1.2 percent at USD 1,252.30 an ounce. On Thursday, it fell below the price of gold for the first time since April 2013 before paring some losses to close down 1.3 percent.
Palladium rose 2.3 percent to USD 751.75 an ounce, after falling as much as 5 percent to its lowest since Feb. 27 in the previous session.
Spot silver was down 0.1 percent at USD 17.30 an ounce.
