Gold rose on Friday after the previous day's tumble, swept higher in an equities rally as EU leaders agreed in principle to form deeper economic integration and US consumer sentiment rose to its highest level in six months. The precious metal, however, was on track for its third weekly loss in the past four weeks, hurt by technical selling earlier this week as investors remained doubtful that the EU would resolve the crippling debt crisis in the long term.
Bullion followed the S&P 500 higher after the EU secured an historic agreement to draft a new treaty to form a closer fiscal union in the eurozone, but Europe's core economy Britain refused to join the other 26 countries. "The markets are digesting the European news, which has so far been inconclusive. Gold investors are going to be deferring making major decisions and take a fresh look after the new year," said George Nickas, a commodities trader with broker INTL FCStone.Spot gold rose 0.5 percent to $1,716.19 an ounce by 11:37 am EST (1637 GMT.
US gold futures for February delivery were up $6.80 at $1,720.30 an ounce, with volume in line to be sharply below its 30-day norm. For the week, bullion was on track for a fall of nearly 2 percent. On Thursday, it posted its biggest one-day drop in nearly three weeks after the European Central Bank dashed hopes of more-dramatic action to fight the region's debt crisis.
Spot silver climbed 1.9 percent to $32.23 an ounce. On charts, analysts said the next technical support level will be its 200-day moving average at $1,615 an ounce, after it breached its 50-day moving average at just above $1,700 an ounce earlier in the session.
"Gold again pulled back from its downtrend line from this year's highs. We feel as if another test of the major uptrend line, if not even the 200-day moving average may come next," said Rick Bensignor, chief market strategist of Merlin Securities. Gold, a traditional safe haven, which has recently moved in tandem with riskier assets, could face pressure after data showed China's industrial output growth hit its slowest pace in more than two years and its inflation tumbled.
James Steel, chief commodity analyst at HSBC, said the metal is also weighed down by gold lending by European banks in return for US dollars, while demand for gold leases was at their lowest levels since 1998. Among platinum group metals, palladium was up 1.7 percent at $682.72, heading for its second week of sharp gains. Platinum rose 1.3 percent to $1,509.74 an ounce.