Gold was headed for a third weekly gain in a row on Friday buoyed by a pause in the dollar rally and short-covering after sharp losses, with support also from physical demand that is picking up on firmer prices.

Spot gold was little changed at $1,193.06 an ounce by 0042 GMT, after gaining nearly 1 per cent in the previous session. The metal is so far up 0.4 per cent for the week.

Dollar vs yen

The US dollar paused for breath on Friday as its recent rapid ascent on the yen attracted profit-taking, though the market mood remains bullish on the currency given the outperformance of the US economy.

Gold had fallen to a 4-1/2-year low of $1,131.85 earlier this month on a strong dollar.

Inflation pressures

Investors focused on US Labour Department data on Thursday which showed underlying inflation pressures rose in October, even though that also bolstered the expectations of a mid-2015 interest rate hike from the Federal Reserve.

Bullion is seen as a hedge against inflation, though an increase in rates could dull its appeal. Gold is a non-interest-bearing asset.

Gold reserves

Ukraine slashed its gold reserves by more than a third in October, while Russia increased its reserves for a sixth straight month, according to International Monetary Fund data released on Thursday.

Switzerland’s gold exports rose more than 12 per cent in October as shipments to major consumers like India and China surged, data from the Swiss customs bureau showed on Thursday.

Some of the biggest price moves in gold since late October have, unusually, occurred in Asian hours and traders more accustomed to following the lead of their Western counterparts suspect a big increase in algorithmic trading may be to blame.

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