Gold slips, but on track for 2nd straight weekly gain

London (Sept 9)  Gold edged lower on Friday as the dollarrecovered some of its early losses, but the bullion was still ontrack for its second successive weekly gain.

Spot gold was slightly down 0.2 percent at $1,335.90per ounce by 0724 GMT. The metal was set for a nearly 1 percentgain this week.

U.S. gold futures were also slightly down at$1,340.60.

"Gold is going to follow the dollar so closely till the U.S.Federal Reserve meeting in September and could trade within arange of $1,335-$1,365," said Ronald Leung, chief dealer at LeeCheong Gold Dealers in Hong Kong.

The metal has given up much of its strong gains from earlierthis week, when weak U.S. jobs data led investors to bet that aSeptember rate rise was no longer on the cards, weakening thedollar.

Gold is highly sensitive to rising U.S. interest rates,which increase the opportunity cost of holding non-yieldingbullion while boosting the dollar, in which the metal is priced.

The dollar index , which measures the greenbackagainst a basket of currencies, was down 0.1 percent at 94.929,after touching a low of 94.803.

Spot gold may retrace to $1,327 per ounce as it failed tobreak a resistance at $1,352, according to Reuters technicalanalyst Wang Tao. The European Central Bank held interest rates at record lowsand kept the door open to more stimulus on Thursday but gave fewhints about its next move, disappointing markets that had pricedin a decisively dovish tone. Accommodative monetary policies favor gold and equitiesbecause low interest rates encourage investors to opt for assetsthat do not rely on interest yields.

"Gold prices have had ample of opportunity to sell-off, butthere has been a lack of follow through selling. Converselythere has been regular dip buying," analysts at ScotiaMocattasaid in a note.

"As such, we think Gold's bull market remains in force, butupside progress may be gradual. In turn, this means it may bemore sustainable."

Holdings of SPDR Gold Trust , the world's largestgold-backed exchange-traded fund, fell 0.13 percent to 950.62tonnes on Thursday. Spot silver was down 0.7 percent at $19.51 per ounce.

Platinum slipped 0.3 percent to $1,079.90 an ounce.Platinum was on track for first weekly gain in six. It was upabout 2 percent so far this week.

Palladium was flat at $682.60 and was on track forits first weekly gain in three.

Source: Reuters