Gold inched up slightly on Friday as a string of disappointing US economic data reinforced expectations that the Federal Reserve would keep its stimulus intact well into 2014. Spot gold was up $6.32, or 0.47 percent, at $1,352.10 an ounce by 1:26 pm EDT (1726 GMT), hovering below its highest level since September 20 of $1,351.61.
Bullion was headed for a 1.7 percent gain on the week having hit four-week highs on Thursday benefiting from weaker-than-expected US jobless claims data earlier in the week. That bolstered expectations the Fed will not start to rein its stimulus program until well into next year. US gold futures for December delivery were up $2.70, or 0.2 percent, at $1,353.
"Things are sluggishly moving here," said Thomas Capalbo, a precious metals broker at New York futures brokerage Newedge, following a weaker-than-expected consumer confidence and durable goods transportation data on Friday morning. "There's no real indication that things are getting much better, and no indication saying that we are going to see tapering soon, so that's going to be beneficial for gold and probably silver too."
Bullion eked out gains even as the dollar recovered off a near nine-month low against a basket of currencies. US Treasury yields traded near three-month lows. After 12 years of gains, gold has fallen nearly 20 percent this year on concerns the Fed would begin cutting back its easy-money policy by trimming its $85 billion monthly bond purchases, which have fuelled gold's appeal as a hedge against inflation.
The metal, however, has rallied around 8 percent in less than two weeks as disappointing US economic data and lingering budget uncertainties in Washington increased gold's safe-haven appeal. "The recent trend in gold and its volatile reaction to the most recent economic release show the market is still heavily data-dependent for price direction," HSBC said in a note.
As a gauge of investor sentiment, holdings in the world's largest gold-backed exchange-traded fund, New York's SPDR Gold Shares, fell 0.2 percent or 1.8 tonnes on Thursday. An outflow of more than 10 tonnes was seen on Monday followed by an increase of 6 tonnes on Tuesday. The gain in spot prices has further deterred physical demand in most Asian countries.
Premiums on the Shanghai Gold Exchange fell to multi-month lows of $2 an ounce on Friday. That compares with highs of $30 seen in April-May. However, in India, premiums were at a record high of $120 an ounce as dealers struggled to meet festive demand amid tight supplies. "The sense is that premiums are elevated and are expected to rise further ... and the expectation is that they (stocks) are likely to run out completely around November," UBS said.
In other precious metals, silver fell $0.02, or 0.09 percent to $22.64 an ounce, having hit a one-month high of $22.85 in the previous session. Spot platinum was up $7.14, or 0.49 percent, at $1,452.24 an ounce, supported by news of a potential South African workers' strike at the world's second-largest producer Impala Platinum after wage talks failed. Spot palladium fell $0.07, or 0.53 percent, to $744.47 an ounce.
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