By Clara Denina
LONDON (Reuters) - Gold slipped on Friday as the dollar advanced versus the yen, but the metal was still looking to post a weekly gain, while silver was set for its biggest weekly increase in 11 months.
The dollar rose as much as one percent against the yen on speculation the Bank of Japan was considering applying negative rates to its lending programme for financial institutions, effectively starting to pay banks to borrow its cash.
Gold was down 0.2 percent at $1,247.26 an ounce by 1231 GMT, after hitting a five-week high of $1,270.10 an ounce on Thursday.
Spot silver rose 1.6 percent to $17.26 an ounce. It had risen to a 11-month high of $17.69 in the previous session and was up 6 percent for the week.
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"We are seeing people taking some profits after yesterday's sharp gains but we are likely to stay in the $1,225-$1,275 range for the time being," MKS SA chief trader Afshin Nabavi said.
Gold had posted its best quarter in nearly 30 years in the three months to March on expectations that the Federal Reserve would not be able to raise U.S. interest rates this year due to volatile markets and concerns over the Chinese economy.
Recent data from China has showed new debt fuelling a recovery in factory activity, investment and household spending, stoking appetite for metals used in manufacturing.
Goldman Sachs maintained its bearish view on gold and other commodities on Friday, and reiterated its recommendation to short gold.
"We continue to expect that the strengthening of the U.S. labour market will force the Fed to hike rates three times this year, which will lead to a stronger dollar and a gradual increase in U.S. real rates, pushing gold down," Goldman analysts said in a note.
Copper jumped to a four-week high, while steel soared to a 19-month top on Thursday.
Silver's rally this week has also been helped by optimism over Chinese growth, and a break above key chart resistance.
HSBC said the gold and silver rallies could be running into headwinds.
"For silver, we favour the market above $17, but expect volatility and further gains may be hard to hold. On the positive side, it appears that solar-panel demand is up and retail demand is solid for silver," it said, adding that gold may need to consolidate around $1,250 before moving higher.
Among other precious metals, platinum was set to log its strongest week in seven with a 4.5 percent rise. It had climbed to a 9-1/2-month high of $1,043.72 an ounce on Thursday.
Palladium was unchanged at $602.21 an ounce and poised for a weekly rise of 7 percent, after climbing to its highest since November on Thursday.
(Additional reporting by A. Ananthalakshmi in Singapore; Editing by Ruth Pitchford and David Evans)
