Gold edged up from Thursday's 2 1/2-week low, supported by a softer dollar and uncertainty over Greece's debt talks, but remained under pressure on Friday from expectations US interest rates might rise soon. The prospect of higher rates, which would boost the opportunity cost of holding non-yielding gold while lifting the dollar, kept the metal on track for a second weekly drop.
Spot gold was up 0.4 percent at $1,192.76 an ounce at 1352 GMT. US gold futures for June delivery were up $4.50 an ounce at $1,193.30. Prices fell to their lowest since May 11 on Thursday, hurt by a rise in the dollar, which climbed to a 12 1/2-year high against the yen. The dollar weakened on Friday after data showed the US economy contracted in the first quarter.
"The recent surge in the dollar, which pushed crude oil prices lower, has put pressure on gold," ING commodities analyst Hamza Khan said. The US growth data was in line with expectations, he said. "It's going to be worse numbers out of the US that are going to be good for gold, because they'll weaken the dollar." There were mixed signals this week on the outcome of talks over Greece's debt, without which Athens risks default or bankruptcy in weeks.
A Greek government spokesman said on Thursday that it intended to agree a cash-for-reforms deal by Sunday. Euro zone officials suggested, though, that a deal was far from imminent, and the head of the International Monetary Fund was quoted as saying Greece could fall out of the euro zone. "While gold hasn't gained much of an upside (from the uncertainty over Greece) ... it hasn't seen much of a downside, given the resurgence of the dollar," Standard Chartered's global head of commodities research Paul Horsnall said.
The dollar has been well bid since Federal Reserve Chair Janet Yellen said last week that the US central bank was on track to raise rates later this year. Gold trading was quiet overnight in Asia, the metal's main physical markets, dealers said. Gold demand across Asia has been subdued this week, with premiums in major trading centres failing to rise despite the price drop. Among other precious metals, silver was up 0.5 percent at $16.76 an ounce. Platinum was flat at $1,113.24 and palladium was down 0.1 percent to $782.