* Gold boosted this week by drop in stock markets, falling
* Fed official dampens talk Fed policy may soon tighten
* Largest physical gold fund sees fresh outflow
(Recasts, updates prices, adds comment, adds to byline,
dateline (prev LONDON)
By Carole Vaporean
NEW YORK, May 24 Gold turned modestly lower on
Friday as some players exited positions ahead of a long U.S.
weekend, but registered its biggest weekly percentage gain in a
month, supported by a drop in stock markets and a softer dollar.
Comments from a Federal Reserve official that dampened talk
the U.S. central bank is set to curb monetary stimulus also
underpinned gold prices, which stuck to a fairly tight range.
Spot gold was down 0.23 percent at $1,387.51 an ounce
by 2:37 EDT (1837 GMT), slightly lower than $1,390.40 late on
Thursday. It remained up 2.15 percent on the week, its biggest
weekly rise since late April.
COMEX June gold futures closed at $1,386.6 per ounce,
down $5.2, or 0.37 percent and held around those levels in
Gold got a boost this week from declining equity markets,
which in Europe on Thursday posted their biggest one-day drop in
nearly a year. On Friday, U.S. stocks fell for a third day,
putting indexes on track for their first negative week since
"A weaker dollar combined with continued QE, some physical
buying at the lower levels out to China in particular, all of
those factors have helped gold in the last few days," said
Robin Bhar, metals analyst at Societe Generale Group in London.
QE refers to quantitative easing, or the Federal Reserve's
program of buying about $85 billion a month in debt to keep U.S.
interest rates low and stimulate the economy.
The dollar extended its decline against the yen and was on
track for its biggest weekly loss in three years against the
Japanese currency. The euro rose 0.7 percent this week against
the dollar, its first weekly gain in three periods.
During the U.S. session, gold ventured into negative regions
with some players reluctant to hang onto a long gold position
over the extended Memorial Day weekend in the United States,
given the latest uncertainty about Federal Reserve policy.
Speculation the Fed would scale back its monetary easing
program weighed on gold this week after Fed Chairman Ben
Bernanke said the central bank could start scaling back its $85
billion in monthly bond purchases in the next few meetings.
But, St. Louis Fed President James Bullard said on Friday
that U.S. inflation would have to pick up before he voted to
scale back stimulus.
"There's a lot of uncertainty. There's still no better than
50/50 chance that the Fed will unwind its stimulus or that the
economy performs as they expect it will," said Bhar.
A healthier-than-forecast reading on April orders for U.S.
durable goods, which range from toasters to aircraft, also
knocked gold lower as the need for a safety play eased investor
concerns about the U.S. economy.
"This week presented something for everyone," Saxo Bank vice
president Ole Hansen said. "The bears have not seen any evidence
of them being wrong, while the bulls got a bit of safe haven and
on balance a rather dovish Bernanke."
"Bottom line, we are still in dangerous territory having
failed so far to move back above $1,414. The double bottom which
is now in the making might give technical traders some comfort,
but for it to be confirmed we ideally need to see a $1,432
print, so it's not yet something to lean against."
GOLD FUND REPORTS FRESH OUTFLOW
The SPDR Gold Trust, the world's largest gold-backed
ETF, reported at the close of Thursday that its holdings had
fallen by another 1.5 tonnes, bringing its total outflow for the
week to 19.8 tonnes.
The fund is on track for its largest weekly outflow since
the week ended April 26. At 1,018.567 tonnes, its holdings were
at their lowest in more than four years.
Macquarie said in a note on Friday that ETF liquidation this
year had totalled 450 tonnes of gold.
"If ETFs continue to leach gold - and despite the outflows,
over 2,200 tonnes remain - then gold's price outlook will depend
on these retail buyers."
Among other precious metals, silver was down 0.71
percent at $22.40 an ounce. Silver held near its cheapest versus
gold in 2-1/2 years on Friday.
Spot platinum was down 0.76 percent at $1,447.49 an
ounce. Spot palladium fell 1.59 percent to $727.72.
Prices at 3:09 p.m. EDT (1909 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold 1386.60 -5.20 -0.4% -11.5%
US silver 22.496 -0.012 0.0% -19.4%
US platinum 1451.90 -5.30 -0.4% 3.7%
US palladium 726.45 -12.20 -1.7% 10.7%
Gold 1384.20 -6.50 -0.5% -11.5%
Silver 22.36 -0.20 -0.9% -19.2%
Platinum 1448.24 -10.37 -0.7% 4.0%
Palladium 722.72 -11.71 -1.6% 10.8%
Gold Fix 1390.25 5.00 0.4% -11.7%
Silver Fix 22.38 -9.00 -0.4% -20.6%
Platinum Fix 1455.00 5.00 0.3% 5.4%
Palladium Fix 729.00 8.00 1.1% 14.6%
(Additional reporting by Jan Harvey in London; Editing by Jane
Baird, Alison Birrane and David Gregorio)