Gold set to post weekly gain on uncertain rate outlook

New York (Oct 17)  Gold inched down on Friday as shares rebounded, but was still set for a second straight weekly gain as concerns over the global economy have raised speculation the U.S. Federal Reserve could keep interest rates low for longer.

Spot gold was down 0.1 percent at $1,237.35 an ounce by 1346 GMT. The metal is up about 1.4 percent for the week after reaching a one-month high of $1,249.30 on Wednesday. U.S. gold futures were down $3.30 an ounce at $1,237.80.

"Gold has had a good week because just about everything else has had a bad week. The rally has paused today, however, as the wider markets are wondering whether things really are quite as bad as they thought they were yesterday," Macquarie analyst Matthew Turner said.

European stocks clawed back some of this week's losses on Friday after solid U.S. data on Thursday calmed turbulence in global financial markets, though underlying worries about slowing world growth kept investors on edge.

Wall Street also rose following a batch of solid earnings reports.

"People are still cautious on gold. They buy it when there is some risk aversion, but in the end when wider sentiment improves you see the metal struggle," ABN Amro analyst Georgette Boele said.

The dollar was up 0.1 percent versus a basket of currencies and was on course for its biggest two-week loss since September 2013 after Fed officials warned at the weekend that if the global recovery stumbled, the bank could delay an increase in U.S. interest rates.

Bets had been rising that the Federal Reserve would raise rates in mid-2015.

Gold has benefited from the low interest rates and increased central banks' liquidity that have prevailed in the years after the 2008 financial crisis.

On Thursday, the head of the St. Louis Federal Reserve Bank, James Bullard, said the central bank may want to keep up its bond-buying stimulus for now, given a drop in inflation expectations.

As a gauge of investor interest, SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings rose 0.2 percent to 760.94 tonnes on Thursday.

Source:  CNBC