Gold prices head for first weekly drop of 2017

Gold pared losses on Friday after softer than forecast US growth data pulled the dollar off earlier highs, but the metal remained on track for its first weekly loss of the year as traders cashed in on this week's rally to two-month highs.

The dollar was 0.1 per cent up against a basket of currencies on Friday, hanging on to positive territory despite the data showing US economic growth slowed more than expected in the fourth quarter. 

That helped to pull gold further down from Tuesday's high of $1,219.59 an ounce and set it on track to end a four-week winning streak with a 2 per cent weekly loss.

Spot gold was down 0.4 per cent at $1,183.87 an ounce by 1341 GMT, off an earlier low of $1,180.73, while US gold futures for February delivery were down $7 an ounce at $1,182.80.

"I think we've seen the high for the moment. We had a good start to the year, but we've run out of steam around $1,220," ABN Amro analyst Georgette Boele said. "Overall, we're just waiting for more positive news.

"In the near term, it very much depends on what the dollar is going to do."

Analysts have sharply scaled back expectations for gold prices this year after the metal's weak fourth-quarter performance, with the prospect of further US interest rate increases weighing on sentiment. 

Some have also suggested that the Trump administration's commitment to higher spending and lower taxes will boost growth, fuelling a rally in cyclical assets such as stocks and industrial metals at gold's expense.

Gold demand in India improved this week, boosted by a fall in prices overseas, though some consumers are waiting in the hope that import duty will be cut in the government's budget next week. 

The absence of buyers elsewhere in Asia during the Lunar New Year holiday, particularly in top gold consumer China, has weighed on the metal, dealers said.

"Most of Asia is already off for the holidays, which is a good time for many to short the metal," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong. "You can see the bids are very weak, which shows the demand right now."

Silver was down 0.6 per cent at $16.66 an ounce, while platinum fell 0.5 per cent to $968.90.

Palladium was down 0.3 per cent at $718.90, having earlier hit its lowest since Jan. 4 at $708.97. The autocatalyst metal has lost more than 8 per cent this week, its worst weekly performance since January last year.