Gold at highest since May 1 on political uncertainty, dollar weakens

Gold hit its highest in nearly four weeks on Friday in response to a weaker dollar and political uncertainty that led investors to shun riskier assets in favour of bullion.

"We have had the political noise coming from Trump and the US administration and there is a certain element of uncertainty in the markets in general, which is supporting gold. Equities are also down," analyst Carsten Menke at Julius Baer in Zurich said.

Leaders of the world's rich nations face difficult talks with Donald Trump at a G7 summit in Sicily on Friday after the U.S. president criticised NATO allies for not spending more on defence and accused Germany of "very bad" trade policies.

Gold is used as an alternative investment during times of political and financial uncertainty.

Spot gold had gained 0.9 percent to $1,266.01 per ounce by 1000 GMT, the highest since May 1. U.S. gold futures gained 0.7 percent to $1,265.60 an ounce.

Menke expects gold to remain rangebound with a price target of $1,200 in three months.

"The headwinds are coming from U.S. monetary policy. We do expect a rate hike in June and we see the dollar strengthening again. On the upside, there's a lot of uncertainty, which keeps people from selling gold and maybe causing a little bit of buying."

The big data points for the day will be the Q1 GDP figures from the United States as well as the durable goods figures, Jordan Eliseo, chief economist at ABC Bullion, said.

"We did issue a buy recommendation on gold some two days ago and will stick with that for the time being, especially considering how well the complex held up in Thursday's session against a variety of headwinds," INTL FCStone analyst Edward Meir said in a note.

The dollar index, which measures the currency against a basket of six major rivals, was down slightly.

Among other precious metals, spot silver was up 0.8 percent at $17.26, platinum was 1.1 percent higher at $957, while palladium rose 0.9 percent to $777.80.

Silver has risen about 2.7 percent this week and is on track to mark its biggest weekly rise since mid-April. Platinum is up 1.2 percent for the week and is set to notch its third straight weekly rise.

Palladium has gained 1.8 per cent this week and is on track for its first weekly gain this month.