Gold edged higher on Friday, helped by a drop in the US dollar to one-month lows, but prices remained in a narrow range ahead of a meeting of euro zone finance ministers later in the day to discuss increasing the bloc's bailout fund.
Spot gold inched up 0.1 percent to $1,663.11 an ounce at 11:50 SA time. The metal is on track for a 6 percent gain in the first three months of 2012, after posting its first quarterly drop in three years at the end of last year.
“All in all gold is still holding fairly well because the US dollar weakened, which gave gold some support,” said Peter Fertig, a consultant at Quantitative Commodity Research.
“Gold had a very good start and run-up until the end of February and it's now consolidating part of the gains in March.”
He said in the coming weeks gold could consolidate further, with risks to the downside. “The stock markets came under pressure this week and also crude oil retreated somewhat and these have been factors which were negative for gold,” he said.
Oil prices rose above $123 on Friday after falling sharply earlier in the week.
The dollar hit a one-month low against a basket of currencies on Friday, dragged down by heavy selling against sterling. A weaker dollar tends to boost gold, which is priced in the US currency.
Risk appetite sharpened on Friday, with safe-haven German bunds flat, while world stocks rose as equity markets picked up gains at the end of the quarter and investors eyed a boost to the euro zone's bailout resources that ministers are expected to sign off on later in the day.
Investors expect the euro zone finance ministers' meeting later in the day to deliver an agreement on temporarily almost doubling the bloc's bailout capacity as one of the final moves to end its debt crisis.
Gold investors largely held off taking fresh positions ahead of the meeting, which may have a significant effect on the currency markets.
INVERSE LINK
While euro zone worries helped drive gold to record highs last year, the metal has since re-established its usual inverse relationship with the dollar so that good news from the bloc, which boosts the euro and weighs on the dollar, tends to be positive for gold.
“In the near term, gold prices may be influenced by the effectiveness of the euro zone's plan to bolster their bailout fund,” HSBC analysts said in a note.
“If the investors deem the plan as sufficient in reducing near-term euro zone liquidity issues, we believe risk assets including gold may benefit,” they added.
US gold futures for June delivery were up $10.80 an ounce at $1,665.70.
Silver was up 0.8 percent at $32.46 an ounce. The gold/silver ratio, or the number of silver ounces needed to buy an ounce of gold, eased back towards 51 on Friday.
Spot platinum was up 1.2 percent at $1,641.70 an ounce and is on track for its best quarterly performance in three years, up 17.6 percent. Palladium was up 1.1 percent at $649.22 an ounce.
South Africa's government is to plough $420 million into a public-private platinum venture with Pallinghurst Resources that has ambitions to become the world's third-largest producer of the precious metal, Pallinghurst said on Thursday.
The partnership, which includes the local Bakgatla Ba Kgafela tribe, has a production target of 1.1 million ounces within the next five years. That would make it the biggest producer behind Anglo American Platinum and Impala Platinum. - Reuters