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Gold clung to overnight gains on Friday on sluggish US economic data but the metal was poised for its third straight weekly drop on persistent uncertainty over when the Federal Reserve will begin to hike rates.
Spot gold was steady at $1,194.35 an ounce by 0644 GMT, after gaining 0.6 per cent in the previous session on weak data on US jobless claims, manufacturing and home sales. The weak data hurt the dollar and boosted safe-harbour bids for gold, but added to the uncertainty over whether the Fed will hike rates in June or September.
Attention will now turn to the Fed's policy meet next week for stronger clues on when the US central bank would begin rising rates. "Should the FOMC ... prove hawkish, we may expect gold to fall swiftly and embark on a new downtrend to $1,145," said Howie Lee, an analyst at Phillip Futures, referring to the Federal Open Market Committee.
Bullion investors fear an early rate hike to reduce demand for gold, a non-interest-paying asset. The metal is down about 1 per cent this week, its sharpest decline in seven weeks. In wider markets, the dollar nursed losses on Friday after underwhelming US economic news, while signs that cash-strapped Greece was making tentative progress in securing fresh funding helped underpin a broad rally in the euro.
Bullion investors were also closely monitoring developments in Greece, as any worsening could prompt haven bids for the metal. German Chancellor Angela Merkel said on Thursday everything must be done to prevent Greece running out of money before it reaches a cash-for-reform deal with its international creditors, amid heightened concern that Athens is nearing the brink.
Traders were also eyeing the Asian physical markets for signs of increased demand that would support global prices. In China, the second biggest consumer, premiums eased to about $1 an ounce over the global benchmark from about $2 in the previous session as price gains kept buyers away.
In top consumer India, demand is set to taper out after strong sales on the Akshaya Tritiya festival on Tuesday. Though gold purchases rose about 15 per cent during the festival, when it is considered auspicious to buy gold, buying tends to soften soon after, likely leading to lower imports as well.
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