Gold prices dipped on Friday, weighed down by a firmer dollar, but some traders said signs pointed to a rebound. Spot gold was down 0.1 percent at $1,288.41 per ounce at 1400 GMT, after hitting its lowest since Dec. 27 in the previous session at $1,285.41. The metal was heading for its biggest weekly decline since early December.
US gold futures for June delivery fell 0.2 percent to $1,287.50 per ounce. "There are many drivers that are pointing to an upside in the precious metals, so we're buying into this weakness," said Gianclaudio Torlizzi, partner at consultancy T-Commodity in Milan. The sentiment index in gold was indicating it was strongly oversold while the dollar was heavily overbought, while US inflation measures were rising, he added.
Data on Thursday showed a tightening US labour market and factory activity in the mid-Atlantic region picking up, bolstering expectations the Federal Reserve will raise interest rates next month. "We think there is room for a strong rally into the summer and we have a gold target of $1,430 by August," Torlizzi said. The dollar index rose to a fresh five-month peak on Friday as the benchmark US Treasury yield hit the highest in nearly seven years.
"The 10-year US yields put the dollar on a firm foot and put pressure on metals and gold," said a Hong Kong-based trader, adding that some "risk-on" sentiment in markets today was also adding pressure. A stronger greenback makes dollar-denominated gold more expensive for users of other currencies, while higher US yields dampen the appeal of non-yielding bullion.
The demands of populist parties likely to form Italy's next government, which promised on Friday to ramp up spending, could also support gold. "A debt crisis in Italy would have a far bigger impact than one in Greece. Gold would profit as a result," Commerzbank analysts said in a note. Spot gold is still targeting $1,302 per ounce as it has stabilised around a support at $1,287, Reuters technical analyst Wang Tao said.
In other metals, silver fell 0.2 percent to $16.39 an ounce and was due to shed slightly more than 1 percent for the week. Platinum dropped 0.6 percent to $883.60 per ounce after hitting a five-month low at $879 on Thursday. Platinum was set to fall around 4 percent on the week, the biggest weekly loss since early December. Palladium declined 0.3 percent to $977.47 and was heading for a 2 percent weekly loss.
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