Gold fell early on Friday as some buyers cashed in recent gains, but the metal was on track for its biggest weekly rise in two months as the dollar retreated and sliding oil prices hurt risk appetite, weighing on stocks. Gold was up 2.6 percent so far this week after Tuesday's steep rally. Falling stock markets have prompted some investors to buy the metal as an alternative asset, while a drop in the greenback made dollar-priced bullion cheaper for holders of other currencies.
"When the equity markets dropped quite sharply, precious metals soared, so there is definitely still the link between equities and gold in particular (due to) risk appetite among market players," Commerzbank analyst Daniel Briesemann said. "Some of the equity markets had a decent run this year. We don't expect this to be continued to the same extent next year, so this might give some tailwind to gold prices."
Spot gold was down 0.5 percent at $1,221.86 an ounce by 1:29 pm EST (1829 GMT), while US gold futures for December delivery fell 0.2 percent to $1,222.60. The spot market briefly fell as much as 1 percent to $1,215.60 after a survey showed US consumer sentiment rose in December to a new eight-year high. "What we're looking at here is better retail sales. These better numbers basically are going to bolster the case for the Federal Reserve to be more hawkish going forward," said Eli Tesfaye, senior market strategist for RJO Futures in Chicago.
"That's never good news for gold." The improved sentiment towards gold was seen in the holdings of the world's top bullion-backed exchange-traded fund, SPDR Gold Trust, which rose 0.13 percent to 725.75 tonnes on Thursday, up nearly 5 tonnes this week. That marks a second straight week of inflows, and the biggest weekly increase in its holdings since early July. Among other precious metals, silver was down 0.5 percent at $17.00 an ounce, while spot platinum was down 1.3 percent at $1,222.75 an ounce. Spot palladium was down 0.6 percent at $811.47 an ounce.
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