Gold set for biggest weekly gain in 10 months on risk aversion
London (Jan 16) Gold steadied on a modestly higher dollar on Friday but looked set to post its biggest weekly gain in 10 months as investors sought safety from volatility in wider markets after Switzerland unexpectedly abandoned a cap on the Swiss franc.
Spot gold was unchanged at $1,261.51 an ounce at 1241 GMT. The metal had posted its biggest daily gain in six weeks on Thursday, up 2.6 percent, hitting a four-month high of $1,266.11 after the Swiss National Bank's move.
It was heading for its biggest weekly jump since March 2014, up more than 3 percent.
U.S. gold futures for delivery in February were down 0.3 percent at $1,260.90 an ounce, having gained 2.5 percent on Thursday.
Volatility in global markets on Thursday prompted investors to channel money towards gold, often seen as an alternative investment to riskier assets.
Dealers assumed that the SNB had moved with the knowledge that the European Central Bank would take the plunge into full scale quantitative easing at its policy meeting on Jan. 22.
Gold has benefited from years of increased central bank liquidity since the 2008 financial crisis, but more monetary stimulus in the euro zone could result in a stronger dollar, in turn weighing on gold prices.
"We've had a very modest pullback in the gold price so far today and the question now is: has the market priced in the ECB quantitative easing?" Citi analyst David Wilson said.
"The drivers for gold at the moment seem to be more about the risk aversion."
The dollar was up 0.2 percent against a basket of major currencies, European shares were mixed after a late rebound on Thursday, while the benchmark 10-year U.S. Treasury yield was hovering around its lowest level since May 2013, hit on Thursday at 1.7 percent.
In a reflection of improving investor confidence, holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 1.35 percent to 717.15 tonnes on Thursday.
"Gold may be lifted further as repercussions of the SNB action continue to reverberate in the markets and portfolio and real money managers decide on how to allocate holdings in light of franc developments," HSBC said in a note.
Physical demand, however, suffered a setback with the higher prices putting off buyers in Asia. Premiums on the Shanghai Gold Exchange fell to $1-$2 an ounce over the global benchmark, from about $3-$4 in the previous session, indicating softer demand.
Silver was up 0.5 percent at $16.97 an ounce, platinum rose 0.3 percent to $1,255.49 and palladium slipped by 0.3 percent to $758.98 an ounce.
Source: Reuters
