NEW YORK/LONDON (Reuters) - Gold edged higher on Friday, posting its largest weekly gain in over a month as it was supported by worries over inflation after encouraging U.S. payrolls data indicated a strengthening labor market.
Gold’s gains were limited by technical resistance from a downward trendline connecting this year’s highs. News that South Korea’s central bank bought more gold in November also failed to spark more buying amid lighter volume near the year end.
Some investors bought gold as a hedge against potential inflation on news that the U.S. unemployment rate fell to a 2-1/2 year low in November, and on market talk that European policymakers again appeared ready to collaborate in tackling the region’s debt crisis.
“Gold investors seem more optimistic about economic recovery by looking at U.S. jobs figures and (possible) euro zone stimulus, and more importantly the inflationary aspects of them,” said George Gero, vice president of RBC Capital Markets.
Spot gold was up 0.2 percent at $1,746.59 an ounce by 3:30 p.m. EST. It has risen 4 percent for the week, for its first weekly gain in three weeks.
U.S. gold futures for February delivery settled up $11.50 at $1,751.30 an ounce.
Volume was about 60 percent below its 30-day average after investors earlier this week completed rolling their contract positions forward. Some trading desks have already closed their books ahead of the year end.
“Gold used to be working as a fear indicator but at the moment it’s trading more or less like a risk asset. Risk is on because of the better (U.S.) employment data and the expectations for the E.U. summit are very high,” said Commerzbank analyst Eugen Weinberg.
The 25-day correlation-log between gold and the S&P 500 rose to around 0.7, near its tightest positive link in more than a year, Reuters data showed, as positive economic news has tended to support gold.
Earlier in the week, gold rallied in tandem with equities and other riskier assets after the world’s major central banks joined forces to boost liquidity.
“Liquidity is the focus of the market. Gold’s appeal as a safe haven may return only when liquidity improves and market sentiment warms up,” said Hou Xinqiang, an analyst at Jinrui Futures.
Next week’s European summit, dubbed the last chance to save the euro by the popular press, will be key for gold, which has lost ground as a safe haven asset in the crisis, analysts said.
Spot palladium rose 1.7 percent to $635.98 following its previous session’s 5 percent rally. The autocatalyst metal has gained 14 percent this week, its biggest weekly gain since November 2008.
Helping the metal was fundamental buying following Thursday’s news that a top executive of Norilsk Nickel (GMKN.MM), the world’s biggest palladium maker, said he expected the market to be in a deficit in 2012 due to sharply lower Russian supplies.
Silver was down 0.3 percent at $32.63 an ounce, while platinum eased 0.8 percent at $1,542.15 an ounce. 3:30 PM EST LAST/ NET PCT LOW HIGH CURRENT
SETTLE CHNG CHNG VOL US Gold FEB 1751.30 11.50 0.7 1741.70 1767.10 100,889 US Silver MAR 32.686 -0.073 -0.2 32.365 33.740 32,074 US Plat JAN 1548.50 -8.70 -0.6 1546.00 1573.00 6,575 US Pall MAR 645.85 15.65 2.5 630.10 663.00 3,446
Gold 1746.59 2.85 0.2 1738.70 1761.75 Silver 32.630 -0.090 -0.3 32.360 33.640 Platinum 1542.15 -13.10 -0.8 1547.75 1569.00 Palladium 635.98 10.68 1.7 630.53 658.00
TOTAL MARKET VOLUME 30-D ATM VOLATILITY
CURRENT 30D AVG 250D AVG CURRENT CHG US Gold 107,220 185,990 194,830 26.09 -0.34 US Silver 34,038 59,816 79,725 44.01 -1.16 US Platinum 7,623 6,528 7,178 31 -3.00 US Palladium 3,471 5,361 4,430
Additional reporting by Rujun Shen in Singapore; editing by Bob Burgdorfer and David Gregorio