Gold slips towards key support after biggest fall in 8 weeks

By Jan Harvey

LONDON (Reuters) - Gold edged down towards key chart support on Friday after its biggest one-day loss in eight weeks, as disappointment at its failure to maintain a push above $1,200 an ounce this week undermined investor confidence.

Prices held above support at $1,180 an ounce and remained on track to end the week marginally firmer as the dollar remained under pressure against the euro, but it failed to attract fresh interest after Thursday's 1.7 percent fall.

Spot gold was down 0.3 percent at $1,180.20 an ounce at 1126 GMT, while U.S. gold futures for June delivery were down $2.90 an ounce at $1,179.50. Earlier this week spot bullion rose as high as $1,215 an ounce.

"Gold did try to push up to $1,215 briefly, but it really struggled to get any new longs into the market," Societe Generale analyst Robin Bhar said. "If it can't breach top of range resistance, common sense dictates the path of least resistance is lower."

"Today's run of data should be key," he added. "The dollar is relatively weak, which is supporting gold for the moment, but if gold can't rally when the dollar's as soft as this, it's not a good omen."

Gold has traded in a narrow range over the last month on uncertainty over the timing of the Federal Reserve's first interest rate rise in nearly a decade, despite weakness in the dollar, which suffered its worst month in four years in April.

Markets are now awaiting U.S. ISM manufacturing numbers and University of Michigan sentiment data at 1400 GMT.

Strong data could shore up expectations the Fed is still on track to raise rates this year, which would lift the opportunity cost of holding non-yielding bullion while boosting the dollar.

Gold tends to move in an inverse relationship with the dollar. A stronger dollar makes the metal more expensive for holders of other currencies.

Major European markets, with the exception of London, were closed for the May Day holiday on Friday. [.L] [FRX/]

From a chart perspective, gold is supported at $1,180 an ounce. A weekly close below that level could by the catalyst for a further pull-back, analysts said.

"Technical signals are biased to further downside and are showing signs of acceleration," said ScotiaMocatta in a note. "We remain bearish and look to a closing break of $1,180, with a focus on further weakness toward the mid-March lows under $1,150."

In Asia, physical demand was light, with China and Singapore were closed for holidays.

Among other precious metals, silver was up 0.1 percent at $16.14 an ounce, while platinum was down 0.2 percent at $1,133.50 an ounce and palladium was down 0.3 percent at $771.97 an ounce.

(Additional reporting by Melanie Burton in Melbourne; Editing by David Evans and Pravin Char)