Gold prices edged up on Friday, on course for a third week of gains as weaker stock markets spurred investors to seek refuge in bullion, which also gained technical momentum after scaling major milestones. Spot gold added 0.3 percent to $1,228.51 an ounce by 1252 GMT. The metal has gained 0.9 percent this week and hit a 2-1/2-month high on Monday at $1,233.26.
US gold futures were steady at $1,229.80. "Gold has done really well to hold up here, given the Fed was really hawkish. Sensitivity to equity markets is helping gold at the moment," said Macquarie commodity strategist Matthew Turner. "We are entering a new paradigm, where any further rate hike could be a sign that the economy is overheating a bit, which should be more positive for gold and problematic for equities."
Every US Federal Reserve policymaker backed raising interest rates last month, according to minutes of its September meeting, which were released on Wednesday. Rising interest rates are normally negative for gold because they increase the opportunity cost of holding non-yielding bullion and could boost the dollar, in which gold is priced.
In wider markets, European stocks tumbled again as Italy's government braces for a showdown with the European Union over Rome's budget plans. Elevated geopolitical risks and pressure on equity markets have created a supportive setting for gold buying, said Deutsche Bank metals strategist Nicholas Snowdon.
The recent sell-off in global stock markets has boosted the appeal of gold, which is often viewed as a safe store of value during political and economic uncertainty. "Today's attempt by gold to lastingly exceed the 100-day moving average looks promising. If it succeeds, technical follow-up buying should push the gold price further up," Commerzbank analysts wrote.
"At the same time, gold is resisting the firm US dollar. It is finding support from increased risk aversion among market participants, as reflected in falling stock markets, and from additional ETF (exchange-traded fund) inflows." Holdings of the SPDR Gold Trust, the largest gold-backed ETF, have gained 2.5 percent in the past two weeks. In other precious metals, platinum rose 1.3 percent to $836 an ounce, silver gained 1 percent to $14.69 and palladium was up 1.3 percent at $1,084.22.
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