Gold eases in early trading as crude oil continues to fall

London (Dec 12)  Gold prices steadied on Friday, on track for their biggest weekly rise since June, as the dollar retreated and sliding oil prices hurt risk appetite, prompting another drop in stocks.

Gold is up 3 percent so far this week. Weakness in stocks has prompted some investors to buy the metal as an alternative asset, while a drop in the U.S. unit made dollar-priced bullion cheaper for other currency holders.

Spot gold was flat at $1,227.30 an ounce at 0956 GMT, while U.S. gold futures for December delivery were up $2.30 an ounce at $1,227.90.

"Gold and silver have both had a very good week, going against the trend seen elsewhere," Saxo Bank's head of commodity research Ole Hansen said. "We have reached levels which short sellers have been attracted to in the past and this may slow the positive momentum that has emerged during the past week."

"Overall there is a feeling out there that traders are now going defensive on their positions and this is weakening the dollar, thereby adding some support to precious metals."

The dollar index was down 0.3 percent on Friday and European stocks slid another 1.4 percent, with further declines in the price of oil hitting energy stocks and political concerns over Greece also curbing risk appetite.

Benchmark Brent crude oil futures fell 1.3 percent to below $63 a barrel, the lowest since July 2009, hurt by a global supply glut and a sluggish demand outlook. Brent is down 8 percent this week, and 45 percent below its June peak.

An improvement in sentiment towards gold was seen in the holdings of the world's top bullion-backed exchange-traded fund, SPDR Gold Trust, which rose 0.13 percent to 725.75 tonnes on Thursday, up nearly 5 tonnes this week.

That marks a second straight week of inflows, and the biggest weekly increase in its holdings since early July.

"The longer gold holds above $1,200, the more it may attract fresh buying and gold ETFs may begin to build," HSBC analysts said in a note.

Among other precious metals, silver was up 0.5 percent at $17.17 an ounce, while spot platinum was up 0.2 percent at $1,240.05 an ounce and spot palladium was down 0.1 percent at $815.72 an ounce.

Source: CNBC