Gold gained on Friday as an escalation in US-China tensions underpinned bullion's safe-haven appeal, although positive economic indicators after some countries eased lockdowns set up the precious metal for a weekly drop.

After declining 1.4% on Thursday, spot gold rose 0.5% at $1,734.27 per ounce by 0747 GMT. US gold futures climbed 0.9% to $1,737. Bullion had rallied to its highest since October 2012 on Monday, but has since lost ground and is now heading for a 0.4% weekly decline.

"The fundamentals are still supportive for gold. But, there was a slight improvement in the manufacturing activity in Europe and the US, the PMI data last night was slightly better," said Avtar Sandu, a senior commodities manager at Phillip Futures.

However, US-China frictions dampened risk appetite, supporting bullion and offsetting pressure on the metal's prices from the slightly better data. Gold has held ground above the key $1,700 per ounce level, building impetus to reach its 2011 peak in the coming quarters, Fitch Solutions said in a note.

The lower-for-longer interest rates with quantitative easing in full swing, macro and geopolitical uncertainty and strong investor flows should continue to support gold prices on a 6-12 month horizon, Fitch added.