Tokyo - Spot gold held above $1 060 an ounce on Friday and was on track to post its fourth straight week of gains, with investors focusing on the pace of the dollar's slide after it hit a new 14-month low versus the euro.
Gold edged up to $1 061.70 an ounce by 05:36 GMT, up 0.2% from New York's notional close of $1 060.00. At its current level, it is poised to rise 0.7% on the week.
"The mood looks good enough for gold to test $1 070.40 in the near future ... The dollar is down against major European currencies, Asian currencies are strong as well," said Kaname Gokon, deputy general manager at Japanese commodity brokerage Okato Shoji's research section.
"Gold has tested (the downside at) $1 050 to $1 054, but in vain, because there was solid buying. It's been resilient and that is generating a consensus that that level is a floor for now," he said.
The greenback's weakness has increased investor interest in the precious metal as a hedge against the US currency. A weaker dollar also makes gold cheaper for non-US investors.
US gold futures for December delivery were at $1 062.50 an ounce, up 0.4%, after falling $5.90 to $1 058.60 on Thursday.
After hitting record highs above $1 070 per ounce last week, gold prices have been in a narrow range centering around $1 060.
A manager with a top Japanese trading house said next week could be crucial in determining whether the market will enter a short-term downtrend or not, as funds, which typically adjust positions at the end of the month, could unwind some of their long positions after seeing volatility fall over the past week.
While the dollar ground to its latest low for the year against the euro on Friday as the market took aim at options barriers, it has recovered against the yen, trading closer to ¥92.
Yen-based gold prices on the Tokyo Commodity Exchange have successively hit year highs this week as the dollar strengthened against the yen from just below ¥90 earlier in the week.
By one estimate, provided that spot gold holds at $1 060, a ¥1 fall against the dollar will push up yen gold prices by ¥34. Tocom gold prices hit a year high of ¥3 140 on Friday. Its Relative Strength Index stood at 81, indicating the market was overbought.
The dollar remains broadly pressured by expectations that US interest rates will remain low for a long time, a view reconfirmed on Thursday by Chicago Federal Reserve President Charles Evans who said policy accommodation was still the top priority.
Gold is also seen as a safe haven at times when the economic outlook is uncertain.
But so far, no strong money inflows have been detected going into gold-backed securities.
Holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, stood at 1 108.094 tonnes on Thursday, unchanged from the previous business day when the holdings fell 1.22 tonnes.
- Reuters