Gold prices dropped 1.4 percent on Friday as European stock markets headed for their biggest weekly gain since mid-February on expectations for more central bank stimulus to lift the euro zone economy. Conciliatory comments by Russian President Vladimir Putin on the crisis in Ukraine on Thursday have also calmed investors, supporting equities over gold, although they remain cautious.
Analysts said soft demand for gold in China and India was also weighing on the precious metal. Spot gold was down 1.4 percent at $1,294.30 an ounce at 1413 GMT, off an earlier high of $1,315.20. US gold futures for December delivery were down $20.20 at $1,295.50. "Gold is really not liking the strong return seen in stocks," Saxo Bank analyst Ole Hansen said. "It's August and activity is light, making these breaks pretty hard for the market to handle."
"(Stops were triggered) initially below $1,310 and then accelerating below $1,305," he said. "The break below $1,295 has now left it vulnerable to some additional weakness next week." US stocks opened higher on Friday, with major indexes on track for a second week of gains, as traders bet there would be no immediate escalation in the tense situations in Ukraine or Iraq.
European stocks were also higher, on track for their biggest weekly gains in six months and lifted by rising expectations for more central bank action to support the euro zone economy after weak data this week. German Bund yields held near record lows. Demand for gold in Asia, home of the world's main bullion consumers, was weak overnight, precious metals group MKS said in a note on Friday.
"Asia was more of the same today in the precious, signing off an exceptionally quiet week with yet another quiet session," it said. "Gold opened the day at $1,312 and did not deviate far from that level ... Some very light retail buying was seen, but they were the only notable flows we saw." Persistently soft gold demand in Asia has stoked worries that buying will fail to pick up in the second half, when it is normally stronger, traders and dealers said.
The World Gold Council said in a report on Thursday that global gold demand fell 16 percent in the second quarter, with China and India between them accounting for over half of the year-on-year decline in bar and coin demand. Hedge fund Paulson & Co maintained its stake in the world's biggest gold-backed exchange-traded fund, SPDR Gold Trust, in the second quarter, while Soros Fund Management LLC sharply boosted its investment in gold mining stocks.
Spot silver was down 1.2 percent at $19.55 an ounce. The silver market entered a new era in benchmarking on Friday after a regulatory drive for more transparency in price setting brought the 117-year-old silver 'fix' to an end. Spot platinum was down 0.8 percent at $1,445.24 an ounce, while spot palladium was flat at $879.75 an ounce. Impala Platinum said on Friday its headline earnings per share would be 70-75 percent lower in the year to June 30, mainly due to a five-month strike at its Rustenburg operations.
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