Gold price hold near 3-week high

New York (Jun 11)  Gold inched lower on Friday as the dollar recovered, though prices held near a three-week high and were on track for a second straight weekly rise.

Often perceived as an insurance against risk, gold has risen nearly 2 percent this week after weaker than expected US payrolls data dented expectations of an imminent rise in US interest rates, though that view was tempered by Thursday's surprise drop in weekly US jobless claims.

 Prices are likely to be bolstered in the next two weeks by nervousness over  Britain's   June 23  referendum on its EU membership, analysts said.

 "The market is no longer worried that the Fed will raise rates next week and investors are more concerned about the  UK  referendum, which is likely to help increase demand for gold,"  Danske Bank  senior analyst  Jens Pedersen  said.

 Spot gold was down only 0.1 percent at  $1,267.25  an ounce by  1151 GMT  , still close to its highest since  May 18  , the  $1,271.31  hit in the previous session.

 Spot silver touched a three-week high earlier in the session and was on track for its biggest weekly gain since the end of April. Though it dropped 0.3 percent to  $17.23  an ounce, the metal has risen about 5 percent this week. "Last week's unexpectedly weak US jobs data and subsequent cautious tone by (Fed chair Janet)  Yellen  opened the door for gold to resume its bull cycle," ANZ analyst  Daniel Hynes  said.

 "Investor demand is expected to remain strong in the short term, driven by easing expectations of a rate hike in the US."

 Gold is highly sensitive to rising interest rates, which lift the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced.

 "  UK  and German sovereign debt yields fell to record lows, helping to fuel gold's rally,"  HSBC  said in a note.

 "Safe-haven and hedge-related buying ahead of the  UK  referendum on continued EU membership is becoming more noticeable, with a portion of this demand being funnelled into physical gold purchases."

 Holdings in  SPDR Gold Trust  , the world's largest gold-backed exchange-traded fund, rose 0.7 percent to 887.38 tons on Thursday, the highest level since  October 2013  .

 Among other precious metals, platinum fell 0.6 percent to  $989.50  and palladium was down 1.1 percent at  $550.86.

Source: KitcoNews