Gold prices hold in narrow range; set to post second weekly gain

By Karen Rodrigues

BENGALURU (Reuters) - Gold prices moved in a narrow range on Friday as investors were cautious ahead of a G20 summit next week where leaders of the United States and China are set to discuss their trade dispute.

The precious metal was set to post a second straight weekly gain as an easing dollar made bullion cheaper for holders of other currencies.

Spot gold was down 0.1 percent at $1,224.34 per ounce, as of 0801 GMT, but about 0.2 percent firmer so far this week.

U.S. gold futures were 0.3 percent lower at $1,224.70 per ounce.

China President Xi Jinping is due to hold talks with U.S. President Donald Trump at the G20 meeting that starts on Nov. 30 in Argentina to reconcile their trade dispute.

"There will be a strong focus on the upcoming G20 summit to gauge the level of trade tensions between the United States and China. Any ratcheting up would favour gold," said John Sharma, an economist with National Australia Bank (NAB).

The United States is set to raise its tariffs to 25 percent on $200 billion of Chinese imports on Jan. 1 from 10 percent currently. Trump has also threatened to impose tariffs on all Chinese imports unless U.S. demands are addressed.

Gold is often used by investors as an insurance against political and financial uncertainty.

"Investors are stepping in to hedge some of the possible tail risk from the G20 meeting next week," said Stephen Innes, APAC trading head at OANDA in Singapore, adding the weaker dollar and U.S. Federal Reserve's rate outlook are also supporting gold prices.

The dollar index is drifting lower after reaching a 16-month high hit earlier this month as a potential global economic slowdown raised doubts about the pace of interest rate hikes by the U.S. Federal Reserve next year.

"A good sizeable portion of the investment community is looking to position long on gold and that has compounded with the fact that the Fed has turned somewhat dovish," Innes said.

Investor interest in bullion was reflected in holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, which rose on Wednesday to their highest since end-August.

On the technical front, gold has been trading above its 50-day and 100-day moving averages and that is keeping it supported for the moment, a Hong Kong-based trader said. Among other precious metals, silver slipped 1.3 percent to $14.30 an ounce and platinum edged 0.2 percent lower to $842.40 per ounce. Palladium dropped 0.6 percent to $1,146 an ounce. The metal was headed for its biggest weekly percentage decline since the week of July 20, down about 3 percent so far.

(Reporting by Karen Rodrigues and Swati Verma in Bengaluru; Editing by Christian Schmollinger and Sherry Jacob-Phillips)