Gold price edges lower, set for weekly gain on fund inflows

By Clara Denina

LONDON (Reuters) - The price of gold slipped on Friday as the dollar ticked up and European share markets extended their rally but was heading for a weekly gain as buying surged via exchange traded funds.

Spot gold was down 0.2 percent at $1,231.80 an ounce by 1056 GMT, while U.S. gold futures for April delivery fell 0.5 percent to $1,232.50 an ounce.

The dollar was up 0.1 percent against a basket of main currencies and European shares rose to a three-week high as financial leaders from G20 nations gathered in Shanghai against a backdrop of worsening economic conditions and a lack of wider consensus on how to fix the problems.

Gold seems to have rediscovered its role as a shelter for risk-averse investors, rising 16 percent this year as share prices have tumbled and fears of a global economic slowdown increased. It hit a one-year high of $1,260.60 this month, further supported by the repricing of expectations for U.S. interest rate rises.

"We moderated our growth targets for the European Union and the U.S. considerably; we have lowered our rates expectations by the end of the year and we have reduced our S&P target for the end of the year. All of this is positive for gold," Deutsche Bank commodity analyst Michael Hsueh said.

Assets of SPDR Gold Trust, the top bullion exchange-traded fund, rose to their highest since March 2015 on Wednesday.

Inflows into the fund since the beginning of the year have already surpassed outflows for the whole of 2015. The increase in assets this year is the highest since 2010.

"There does look to be good money going into ETFs, and their correlation with the price is really strong ... I won't be surprised if we make new highs," said a bullion trader in Hong Kong.

Bullion is also supported by strong technicals.

Gold prices have developed a bullish technical formation called the 'golden cross,' where the 50-day moving average goes above the 200-day moving average.

The shorter term price average is now about $3 above the longer-term average.

This is the first such occurrence in nearly two years and would be a bullish buy signal for technical traders and momentum-driven investors.

Among other precious metals, platinum dropped to a three-week low of $912.80 an ounce, while silver fell 0.4 percent to $15.07 an ounce and palladium rose 0.4 percent to $484.45 an ounce, but remained near a six-week low reached in the previous session.

(Additional reporting by A.Ananthalakshmi in Singapore; Editing by Greg Mahlich)