Bengaluru — Gold held firm on Friday near a one-week high hit in the previous session and was on course for its first weekly rise in three as the dollar weakened after the US Federal Reserve signalled no increase in the pace of monetary tightening.

Spot gold was up 0.1% at $1,227.11/oz by 3.08am GMT, after hitting its highest since March 6 in the previous session at $1,233.13. US gold futures were down 30c an ounce at $1,226.80.

The metal rose and the dollar index hit a five-week low on Thursday after the Fed raised US interest rates as expected, but did not flag any plans to accelerate the pace of monetary tightening as some had expected. "The market is not sure about the timing of a rate hike in the future. I would expect gold to trade in a wide band of $1,190-$1,230 between the French elections and US Federal Reserve meeting in May," said Jiang Shu, chief analyst at Shandong Gold Group.

"What’s happening now is just an inverse trade against the dollar. If there is a risk averse sentiment, we can see both the gold and dollar rising together, especially after a Fed rate hike," Shu added.

Gold is highly sensitive to rising US interest rates, as these increase the opportunity cost of holding nonyielding bullion, while boosting the dollar, in which it is priced.

Analysts said the election this week in Holland had calmed concerns over political risk in Europe, as Dutch centre-right Prime Minister Mark Rutte fought off the challenge of anti-Islam and anti-EU rival Geert Wilders. Rutte’s victory was hailed across Europe by governments facing a rising wave of nationalism, denting gold’s safe-haven appeal.

Holdings of SPDR Gold Trust fell 0.28% to 837.06 tonnes on Thursday from 839.43 tonnes on Wednesday. The world’s largest gold-backed exchange-traded fund (ETF) saw outflows after three consecutive sessions of inflows this week. However, the Group of 20 (G-20) meeting of finance ministers and central bankers this weekend could lend a potential safe-haven bid to gold, said Jeffrey Halley, senior market analyst at Oanda.

"This meeting has the potential to be more heated so to speak, with some very militant senior members of the new Trump administration in attendance and looking to shake the global trade tree," he said.

Spot silver was down 0.1% at $17.27/oz. The metal hit its highest since March 7 at $17.56 in the previous session, before easing on profit taking later in the day. Platinum was down 0.4% at $949.75, while palladium dropped 0.1% to $763.50.


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