Gold steady as dollar slips, on track for second straight weekly gain

Gold held steady early on Friday on a weaker dollar and was on track for its second successive weekly gain.

Spot gold was up 0.1 per cent at $1,339.06 an ounce by 0425 GMT. The metal was set for a 1-per cent gain this week.

US gold futures were steady at $1,342.20.

"Gold is going to follow the dollar so closely till the US Federal Reserve meeting in September and could trade within a range of $1,335-$1,365," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.

The metal has given up much of its strong gains from earlier this week, when weak US jobs data led investors to bet that a September rate rise was no longer on the cards, weakening the dollar.

Gold is highly sensitive to rising US interest rates, which increase the opportunity cost of holding non-yielding bullion while boosting the dollar, in which the metal is priced.

The dollar index, which measures the greenback against a basket of currencies, was down 0.2 per cent at 94.840.

Spot gold may retrace to $1,327 per ounce as it failed to break a resistance at $1,352, according to Reuters technical analyst Wang Tao.

The European Central Bank held interest rates at record lows and kept the door open to more stimulus on Thursday but gave few hints about its next move, disappointing markets that had priced in a decisively dovish tone.

Accommodative monetary policies favour gold and equities because low interest rates encourage investors to opt for assets that do not rely on interest yields.

"Gold prices have had ample of opportunity to sell-off, but there has been a lack of follow through selling. Conversely there has been regular dip buying," analysts at ScotiaMocatta said in a note.

"As such, we think Gold's bull market remains in force, but upside progress may be gradual. In turn, this means it may be more sustainable."

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.13 per cent to 950.62 tonnes on Thursday.

Spot silver was nearly flat at $19.60 per ounce.

Platinum rose 0.5 per cent to $1,087.50 an ounce. Platinum was on track for first weekly gain in six. It was up about 2.4 per cent so far this week.

Palladium rose over 1 per cent to $689.24 and was on track for its first weekly gain in three.