* Fed's downplay of tapering plans soothes investors
* ETF outflows abate in New York, Chinese fund launch muted
* Russian central bank holds off gold purchases in June
(Recasts with fresh comments, adds second byline and NEW YORK
By Barani Krishnan and Jan Harvey
NEW YORK/LONDON, July 19 Gold rose on Friday to
notch its second weekly gain after many investors were soothed
by the Federal Reserve's assurance this week that it will be
careful in tapering its economic stimulus, although some braced
for another decline in bullion.
Gold emerged as an alternative to the softer dollar
and U.S. stocks, which retreated on Friday from
The spot price of bullion hovered near $1,295 an
ounce by 3:00 p.m. EDT (1900 GMT), up 0.8 percent on both the
session and the week.
U.S. gold futures for August delivery settled at
$1,292.90 an ounce, up 0.7 percent on the day and 1.3 percent on
On Wednesday, gold tumbled about 1 percent after Fed
Chairman Ben Bernanke reiterated the U.S. central bank's intent
to scale back later in the year its $85 billion in monthly bond
purchases, a program that has fueled precious metal price gains.
The Fed's ultra-loose monetary policy has retained pressure
on long-term interest rates while its stimulus has added to
fears of inflation, stoking gold prices.
Bernanke, addressing Congress over two days, later said that
the Fed's stimulus-tapering plans were not set in stone and
depended on the strength of the economy. That helped the gold
market recover on Thursday and Friday.
Despite the Fed chief's assurance, some braced for another
investor stampede out of gold in the near term.
"I'm still a bear, maybe on the wrong side of the camp, but
with the stock market possibly hitting another record and with
any slight uptick in interest rates, we could be looking at gold
going very quickly below $1,100," said Frank McGhee, chief
precious metal at Integrated Broking Services in Chicago.
"This market is so unpredictably violent that it could roll
off a couple of hundred dollars in just three sessions."
Bullion has slipped more than 20 percent this year on the
Fed's hints that its monthly bond-buying program may end
altogether by mid-2014.
ETF OUTFLOWS SLOW
In line with this week's rebound in gold, outflows from SPDR
Gold Trust - the world's largest gold-backed
exchange-traded fund - slowed to 3.9 tonnes this week from 22.9
tonnes last week.
Gold holdings in SPDR are down 416 tonnes
this year, giving investors a fundamental reason to flee
China's first two newly launched gold exchange-traded funds
have raised a total of 1.6 billion yuan ($261 million) in their
initial funding round, coming in below expectations due to
sliding gold prices and a recent credit scare.
"Chinese buyers may have held back somewhat in anticipation
of even lower gold prices," Commerzbank said in a note.
Russia's central bank posted data showing it did not add
gold to its reserves for the first time in nine months in June,
when bullion prices fell by more than 10 percent to their lowest
in nearly three years.
Russia has been the biggest gold buyer in the official
sector in the past decade. A shift by central banks from major
sellers of bullion to net buyers has been a major support to the
gold market in recent years.
Spot silver was at $19.48 an ounce, up 0.6 percent on
the day and down nearly 2 percent on the week.
Spot palladium was at $745.50 an ounce, up 0.4
percent for the session and almost 4 percent for the week. Spot
platinum hovered above $1,422 an ounce, up 0.7 percent on
the day and 1.6 percent on the week.
(editing by Jim Marshall)