Gold edged lower on Friday on profit taking a day after a deal to contain the eurozone debt crisis triggered a broad rise in equities and commodities, but gold posted its biggest weekly rise since January 2009.
Spot gold finished at $1,743.10 per ounce, almost even with where it ended the previous session at $1,743.95. It retreated from a one-month high of $1,751.99 to spend most of the session modestly lower. "There was light profit taking going into the weekend after a big move up. Also, with equities correcting themselves after a huge move up yesterday, I think the gold market is pausing. There's not a lot of conviction to get into the market going into the weekend," said Adam Klopfenstein, senior market strategist for futures broker MF Global in Chicago.
For the week, bullion climbed about 6.5 percent, the biggest weekly gain since January 2009, according to Reuters graphics. "We had a really heavy week on the news front with the eurozone and US GDP. The market's trying to work out where gold should be, wondering if this eurozone package has solved the problem," Mitsubishi analyst Matthew Turner said.
US December gold futures lost around 50 cents or 0.3 percent to end at $1,747.20, but recorded its sharpest weekly gain in six weeks. Some investors took profits a day after big rallies in many commodity and equity markets on a long-awaited deal struck by European Union leaders to contain a two-year debt crisis.
US stocks also edged lower as investors paused after a day-earlier rally lifted the S&P 500 index almost 20 percent from near bear market levels hit this month. Klopfenstein and others added there was little reason to own gold as a flight-to-quality play after the European debt deal was inked and with US economic data showing strength.
"US data was more supportive especially with the better US Michigan sentiment, which takes away a little bit of flight-to-quality money from gold," he added. A survey showed US consumer sentiment improved in October for the second month in a row, as consumers felt more upbeat about the economy's prospects.
The Thomson Reuters/University of Michigan survey's final reading on consumer sentiment overcame weakness reported in the preliminary survey earlier in the month. US consumer spending rose in September as Americans saved less to fund purchases amid weak income growth. For the week, the EU debt issue helped gold and other precious metals advance, especially as the dollar dropped on the eurozone debt news.
Even as many investors returned to riskier assets, gold also benefited from some safe-haven flows by investors who remained wary about the eurozone agreement. "There's been some euphoria all week, but now some people are saying the details are a bit sketchy.
The problem is no one's quite sure what this means for gold. If it is trading like a risk asset then it should go up if scepticism sets in about the eurozone rescue," Mitsubishi's Turner said. Holdings of the largest gold-backed exchange-traded-fund (ETF), New York's SPDR Gold Trust fell 0.05 percent from Wednesday to Thursday, while that of the largest silver-backed ETF, New York's iShares Silver Trust SLV, remained unchanged for the same period.
"Beyond the very near-term we think economic fundamentals will be watched more closely again. In this context, we still think that gold looks the strongest in the near term given low interest rates and improving technical momentum," Credit Suisse said in a research note. "We have more concerns for silver, despite the fact that it was the big winner yesterday. In silver, overvaluation remains a major risk. Apart from that the market is also more vulnerable to renewed swings in risk appetite than gold."
Spot silver moved up to $35.29 an ounce in late trade from $35.05 an ounce on Thursday. It posted its biggest weekly rise of around 13 percent in more than three years. The gold-silver ratio, used to measure how many ounces of silver is needed to buy an ounce of gold, fell to a one-month low below 50, indicating the extent of gold's outperformance over silver. Platinum was higher at $1,642.24 an ounce, having earlier hit a one-month high at $1,658 an ounce. Palladium rose to $663.50 an ounce from $662.65.
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