Gold gains as growth concerns dent risk appetite

[BEGNALURU] Gold prices rose on Friday as weak economic data from the euro zone exacerbated fears of a global slowdown, weighing on risk sentiment and putting bullion on track for its best week in nearly two months.

Spot gold climbed about 0.3 per cent at US$1,313.07 per ounce by 1.48pm EDT (1748 GMT), while US gold futures settled 0.4 per cent higher at US$1,312.3.

The metal was up nearly one per cent for the week, on track to mark its biggest weekly percentage gain since beginning of February.

"There is some safe demand that has surfaced," said Jim Wyckoff, senior analyst at Kitco Metals.

"The US Federal Reserve suggested US economic growth was slowing, which has spilled over into notions that the rest of the world economy might be experiencing slower growth. That was highlighted by the PMI data out of the European Union, auguring for some trepidation in the world's stock markets."

Businesses across the euro zone performed much worse than expected this month as factory activity contracted at the fastest pace in nearly six years, hurt by a big drop in demand, a survey showed.

European stocks suffered after the weak data, while US stocks opened lower.

"Price action in gold continues to lend strength to our view that expected data deterioration will help spark a gold rally as interest rates continue to fall in the context of a slowing global economy," analysts at TD Securities wrote in a note.

Earlier this week, the Fed brought its three-year drive to tighten monetary policy to an abrupt end, abandoning projections for any interest rate hikes this year.

Lower interest rates reduce the opportunity cost of holding non-yielding gold and weigh on the US dollar.

Gold prices rose to their highest since Feb 28 on Thursday at US$1,320.22. Despite paring some of those gains, they were still on track for a third straight weekly gain, up about one per cent so far.

"Gold could not break above US$1,320 on the upside and saw a correction. The current trading range seems to be between US$1,305-US$1,320," said Afshin Nabavi, senior vice-president at MKS SA.

"With the geopolitical and the (uncertain) Brexit situation, we may still be heading higher."

Among other precious metals, spot palladium fell 3 per cent to US$1,560.51 per ounce, after touching an all-time high of US$1,620.53 in the previous session.

Silver slipped 0.4 per cent at US$15.41 per ounce, but was up about 0.8 per cent for the week.

Platinum fell 1.4 per cent to US$846. Platinum has risen more than 2 per cent so far this week.

REUTERS