Gold rose above $1,645 an ounce on Friday as a better-than-expected German business sentiment survey lifted the euro versus the dollar, but trading was light as investors awaited further news on the euro zone crisis and U.S. monetary policy.
Spot gold was up 0.2 percent at $1,645.69 an ounce at 1210 GMT, while U.S. gold futures for June delivery were up $5.50 at $1,646.90. Prices are on track to fall 1 percent this week despite holding within their narrowest weekly range in more than a year.
Sentiment for gold is currently mixed, with lower perceived prospects for quantitative easing in the United States counterbalanced by ongoing safe haven demand, particularly in a context of renewed European sovereign debt concerns, BNP Paribas analyst Anne-Laure Tremblay said.
Subdued physical demand from India in recent weeks is likely also weighing on the price, she added.
A well-received reading of the German business climate lifted the euro and boosted European stocks, reflecting a cautiously optimistic tone to the markets.
However, the bond markets reflected growing concerns over the euro zone, with Spanish 10-year yields breaking back above 6 percent, driving German Bund prices to record highs.
Gold is struggling for direction as buyers await the outcome of International Monetary Fund and World Bank meetings this weekend, at which plans to tackle the euro zone debt crisis will be discussed, and a U.S. Federal Reserve meeting next week.
Washington is hosting meetings of the Group of 20 countries and the semiannual meetings of the IMF and World Bank this weekend. The IMF will be bidding for a funding boost to handle the euro zone debt crisis.
Russia said G20 countries were ready at the meeting to commit enough funds to fulfil IMF chief Christine Lagarde's request for at least $400 billion to draw a line under the euro-zone crisis.
IMF director Christine Lagarde... today believed she could reach her $400 billion goal of additional IMF lending capacity, while the World Bank president Robert Zoellick stated that the ECB needed to do more for Europe in addition to (liquidity injection) LTRO, Sharps Pixley said in a report.
The expectation of more liquidity coming into the system may have given the gold price a reprieve.
PHYSICAL BUYING WEAK
Appetite for physical gold in India, historically the world's number one bullion consumer, was lacklustre ahead of the key gold-buying festival of Akshaya Tritiya on Tuesday, as high prices and rupee weakness curbed interest in the metal. The rupee hit a three month low versus the dollar earlier.
Physical demand is currently underwhelming - barely even blinking when prices dipped below $1640 yesterday - and this hardly offers any assurance that gold can easily find support on any further price drops, UBS said in a note.
Appetite from India has fallen off from the strong level we took note of earlier in the week, keeping with the trend of strong days being followed shortly by a series of ordinary days, it added. In the context of next week's significant Akshaya Tritiya festival, this is somewhat worrying.
Silver was up 0.4 percent at $31.85 an ounce, while spot platinum was up 0.3 percent at $1,579.24 an ounce and spot palladium was up 0.4 percent at $663 an ounce.
Gold's ratio to platinum and to silver has edged lower this week as it has underperformed. One ounce of gold now buys 51.7 ounces of silver, down from 52.7 a week ago, and 1.04 ounces of platinum, against 1.05 ounces last Friday.
Silver, platinum and palladium are currently under pressure due to their industrial characteristics, but should also increase again over the course of the year, Commerzbank said in a note.