* Bullion meets resistance around $1,597 an ounce
* Euro recovers from four-month low versus dollar
* Silver outperforms gold as prices turn positive (Updates prices, comment throughout; adds NEW YORK dateline and second byline)
By Josephine Mason and Jan Harvey
NEW YORK/LONDON, May 18 (Reuters) - Gold rose more than 1 percent o n Friday, on track for its largest two-day gain since October, boosted by investors’ consolidation of positions ahead of the weekend and a stronger euro.
The second day of gains helped bolster confidence, which had been shaken by gold’s fall earlier this week to a four-month low at $1,527 an ounce, near critical long-term support levels.
But traders remained cautious given how the escalating crisis in Europe has driven the single currency lower this month.
“There is still no conviction in the market. If gold was a safe haven, it should be higher. Physical demand is mediocre and the Europeans want the dollar, which is why it is so strong,” a physical U.S. gold trader said.
The psychologically important $1,600-per-ounce mark remained elusive.
It got close, hitting an intraday high of $1,597.4 an ounce in late morning, before meeting technical resistance and easing back to around $1,590.
Spot gold was up 1 percent at $1,588.96 an ounce at 2:06 p.m. EDT (1806 GMT), while U.S. gold futures for June delivery settled 1.08 percent higher at $1,591.9.
That takes gold up 0.6 percent on the week, snapping two weeks of losses, and brings it back to positive territory year-to-date, with a 1.5-percent rise.
While it was a far cry from the 14-percent gain in February when prices came close to $1,800 an ounce, bullion outpaced the U.S. equity market after Facebook’s much-anticipated debut stumbled after a delayed opening.
Trading on Friday returned to familiar trends, tracking the euro, which recovered from four-month lows against the dollar, though concerns over a Greek euro exit and instability in the Spanish banking system weakened confidence.
“To see a return of gold reacting positively to macro stresses is indeed refreshing, but it is still far too early to make any firm conclusions from here that gold has indeed turned the corner,” UBS said in a note.
“Momentum will be key, and follow-through buying will have to kick in to encourage investors to jump in.”
Holdings of gold-backed exchange-traded funds tracked by Reuters, which issue securities backed by physical metal, edged up 76,000 ounces on Thursday, but remained under the 70-million-ounce level they slipped below a week ago.
Among other precious metals, silver gained 2.18 percent at $28.64 an ounce.
The gold/silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, touched 56.6 this week, its highest since late December, easing back on Friday to around 56 as silver outperformed gold in a rising market.
Spot platinum was up 0.53 percent at $1,452.75 an ounce, while spot palladium put on 0.54 percent at $601.22 an ounce. Both metals underperformed surging gold prices, with the gold:platinum ratio rising to a 3-1/2-month high at 1.09.
As chiefly industrial metals used in autocatalysts, platinum and palladium are more exposed than gold to the economic cycle, and have suffered from a lack of car demand in recent years. Industry players gathered in London for Platinum Week this week were pessimistic that prices would recover soon.
In a rare positive story for the metal, a senior official of Hong Kong-based jeweller Luk Fook said China’s platinum jewellery market, the world’s largest, has great potential for growth as rising wealth fuels luxury product demand. (Editing by Dale Hudson)