Gold steady above $931; tracks dollar retreat vs euro

By Nick Vinocur

LONDON (Reuters) - Gold rose on Friday, steadying above $931 per ounce as the dollar lost ground versus the euro, with deeper concerns over the U.S. economic outlook also underpinning the metal.

Spot gold stood at $931.70 by 11:10 a.m. EDT, up from $928.65 late in New York. Earlier it rose to $933.90.

After a week of tracking a volatile dollar, gold is on course for a 0.6 percent fall on the week -- retreating further from a four-month high near $990 hit in early June.

The precious metal found support above $931 after falling on Thursday, when weaker-than-expected U.S. non-farm payroll data sent investors piling into the relative safety of the dollar.

The U.S. currency .DXY lost some ground against a basket of six currencies but remained broadly positive on Friday, with U.S. financial markets closed ahead of Independence Day.

Dollar moves have proved influential of late in determining immediate interest for bullion from foreign investors.

But the bleak jobs data and other mixed economic indicators have highlighted gold's core appeal as a harbor from risk.

Analysts said gold was being supported by increased demand from retail investors, but also persisting questions about the world economy's ability to right itself in coming months.

"This is typical of the situation which you get when the economy is bottoming out: the data is mixed, there is no clear trend, and you have questions about the pace and sustainability of economic recovery leading some investors back into gold," said Peter Fertig, analyst at Quantitative Commodities Research.

"Retail investors are most likely spooked by what they read in internet forums, that inflation is around the corner and they should buy gold, but that would only be a risk if the economy gained momentum very quickly," he added.

Bearish sentiment in the wake of weak unemployment data from the United States and Europe weighed on other commodities, dragging crude below $67 per barrel.

DOLLAR BLUES

Analysts said a combination of persistent worries -- from quantitative easing to Chinese remarks about currency reserve diversification -- would keep the dollar under pressure in months ahead and provide a backbone of support for gold.

"Part of the reason gold's retreat was tempered really has to do with the limited upside to which the dollar is gaining," said Ashraf Laidi, an analyst at CMC markets.

"This is partially due to worries about quantitative easing and these Chinese rumblings about diversification," he added.