(REUTERS) -- Gold rose on Friday, heading for its best weekly performance since late October after the Federal Reserve signaled its ultra-loose monetary policy would continue, keeping the dollar under pressure and the opportunity cost of holding bullion low.
Silver and platinum prices were also on course for their best monthly performances in nine months and nearly four years respectively in January, tracking gains in gold, stocks and other commodities.
Spot gold was up 0.5 percent at $1,727.81 an ounce at 1500 GMT and has risen 10 percent this month, recouping December's hefty losses. It is up 4.2 percent this week alone, its biggest one-week gain since the week ending October 30.
The metal surged to a seven-week high just below $1,730 an ounce on Thursday after the Fed said it planned to keep interest rates on hold until at least 2014 and signaled it would be ready to take further measures to stimulate the economy.
The Fed's announcement that it would keep its rates exceptionally low until 2014 was... clearly not fully priced by the market, said BNP Paribas analyst Anne-Laure Tremblay. Real interest rates are likely to stay negative in the U.S. in the next two years, which will be supportive of the gold price.
The dollar eased 0.3 percent against the euro, further helping gold, which usually benefits from weakness in the U.S. unit. The euro hit a five-week high on Thursday.
The U.S. currency briefly recovered against the euro after data showed the U.S. economy grew at its fastest pace in 1-1/2 years in the fourth quarter of 2011, but its rise failed to gain traction.
The euro itself remains under pressure from concerns over euro zone debt, as the markets awaited a breakthrough in Greek debt talks. Athens was in negotiations with private creditors to restructure its debt.
The European Union and IMF want Greece to push through more budget cuts and implement a series of austerity reforms before they agree on any new bailout the country needs to avert bankruptcy, a report obtained by Reuters showed.
The debt crisis was a major driver of higher gold prices last year, as investors bought the metal as insurance against a worsening outlook for the euro zone. However, its rally stalled in late 2011 as investors became acclimatized to the situation.
The market attitude towards gold for most of January could be summed up in two words: cautious optimism. Investors were reluctant to add to positions aggressively as memories of the disappointment in Q4 lingered, said UBS in a note.
A fresh catalyst was needed and we think the FOMC outcome on Wednesday fit the bill. More accommodative policy is a very good foundation for gold to build on the next move higher.
U.S. gold futures for February delivery were up 90 cents at $1,727.60 an ounce. Among other precious metals, silver was little changed at $33.40 an ounce.
Silver is on track for a near 20 percent rise in January, its biggest one-month gain since April 2011, when it rallied to a record $49.51 an ounce. Caution has dominated the market since then, as the all-time high was followed by a sharp correction.
Spot platinum was up 0.1 percent at $1,605.49 an ounce, while palladium was down 0.6 percent at $683.47. Platinum has outperformed palladium this month, climbing 15 percent for its biggest one-month rise since February 2008.
If the advanced economies can manage to collectively maintain even minimal growth in 2012... and global vehicles sales can eke out another year of gains as projected, platinum prices could continue to firm at least through the first half of the year, said A1 Specialized Services & Supplies, the world's biggest PGMs recycler from autocatalysts, in its January note.
There has also been evidence in recent weeks that investors have begun to buy platinum and sell gold in expectation of a correction in the historically low ratio. Gold's unusual premium over platinum has narrowed to around $120 an ounce from a record near $230 an ounce on January 6.
South Africa's chief mine inspector, David Msiza, on Friday defended safety-related mine closures that have cut into production at the world's top platinum producers including Lonmin and Anglo American's Anglo Platinum.