Gold climbed to a two-week high on Friday as weak U.S. economic data eased fears the Federal Reserve could soon scale back its bullion-friendly bond buying programme.
A rise in gold-backed exchange-traded fund holdings for the first time in three weeks also underpinned the precious metal, typically seen as a hedge against inflation. But physical demand softened with gold set to log its second straight week of gains. “The short-term trend (for gold) seems to be higher for the moment,” said Edward Meir, an analyst with INTL FCStone.
“Stocks are wobbly and U.S. macro data is inconsistent enough to allow some doubt to creep in with respect to just how quickly the Fed will start paring back its stimulus.” Spot gold rose 0.5 percent to $1,419.81 an ounce by 0257 GMT, touching a high of $1,421 earlier—a level not seen since May 15. U.S. gold rose $7.50 to $1,419.
Both were on track for a 2 percent gain this week. Fears the U.S. central bank could start reining in its $85 billion in monthly asset purchases as early as the summer had sparked a sell-off in gold and a rally in the dollar.
But recent weak economic data, showing the U.S. economy expanded less than previously estimated in the first three months of the year and a surprise increase in initial jobless claims last week, stirred up hopes the Fed may continue its easing policy, which would keep interest rates low and money cheap.   Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose on Wednesday for the first time since May 9, to 1,013.15 tons. But the holdings are still near four-year lows as investors jumped to higher-yielding stocks this year.
PHYSICAL DEMAND SOFTENS
Rising gold prices, up more than 4 percent in two weeks, have deterred buyers in India and China, the top two consumers of bullion. There was a mad rush for gold in April when prices sank to a two-year low of $1,321.35. “The physical market across Asia has been quiet after prices went upto $1,400,” said a trader in Singapore.
“We will have to go back to $1,370 and below for demand to pick up again.”
Most Asian countries saw premiums for gold bars ease as spot prices rose but some like Singapore continued to see high premiums due to a supply shortage, traders said earlier this week.
Precious metals prices 0257 GMT

COMEX gold and silver contracts show the most active months
Source: Reuters
Source: Bullion Bulletin