Gold set for biggest monthly gain in a year

By Marcy Nicholson and Clara Denina

NEW YORK/LONDON (Reuters) - Gold edged higher on Friday after U.S. data showed economic growth braked sharply in the fourth quarter and the price of the precious metal was on track for its biggest monthly rise in a year after global economic headwinds hit riskier assets.

The metal has risen more than 5 percent in January, underpinned by concerns over the world's growth outlook, especially China, which has raised questions about the pace of interest rate rises in the United States.

"Maybe things won't be this bad next month in the wider markets, so it is possible that if ETF flows are subsiding, prices will be lower too," Macquarie analyst Matthew Turner said.

"But one positive lesson we can learn from this month is that gold does still have a safe-haven role and that could stand it in good stead through a testing year to come."

Spot gold was up 0.2 percent at $1,116.46 an ounce at 2:51 p.m. EST (1951 GMT), while U.S. gold for February delivery settled up 0.1 percent at $1,116.40 an ounce.

Global equities jumped and the yen slumped after the Bank of Japan stunned markets by adopting negative interest rates, while hopes the U.S. Federal Reserve will slow the pace of future rate hikes also underpinned stock gains and supported gold prices. [MKTS/GLOB]

"The probability, according to futures, of a Fed rate hike in March is less than 20 percent," said George Gero, precious metals strategist for RBC Capital Markets in New York, adding that the weak 10-year U.S. Treasury yield was also supportive to bullion prices.

Gold reached a 12-week high of $1,127.80 on Wednesday, after the Federal Reserve said it was closely watching the global economy and financial markets. This supported the view that U.S. policymakers may not be able to raise interest rates again as soon as March.

"On the upside, I would look for $1,150, while there seems to be some support at $1,100, especially after the more dovish tone of the Fed this week," MKS SA head of trading Afshin Nabavi said.

The market largely shrugged off comment by Dallas Fed President Robert Kaplan, who said the Fed will be patient about policy decisions.

The dollar's ascent accelerated after the release of the U.S. gross domestic product report, which was in line with economists' expectations, but showing a decline.

Spot silver was up 0.4 percent at $14.28 an ounce, while spot platinum rose 0.5 percent to $864.91 an ounce and palladium gained 1.1 percent to $495.19.

(Additional reporting by Manolo Serapio Jr. in Manila; Editing by Susan Fenton and Lisa Shumaker)