Gold eases on Wall St rally, bright US trade data

Gold fell on Friday as gains in US equities and economic optimism after encouraging international trade data prompted bullion investors to reduce their bullish bets.

Bullion fell after US data showed the economy likely expanded slightly in the fourth quarter as higher exports and a slump in oil imports narrowed the trade gap, suggesting a surprise drop in economic output reported last week was overstated.

The metal was also pressured by overnight Chinese export and import figures, which pointed to robust domestic demand and a pickup in the economy. Signs of a heated Chinese economy could force the country's central bank to tighten its monetary policy.

Gold was nearly unchanged for the week, while US equities, as measured by the S&P, were up 0.3 percent after better US manufacturing data earlier this week.

Renewed economic fears over the euro zone and the Bank of Japan's recent effort to weaken the yen, however, could boost gold buying, traders said.

"The biggest factor to watch out for gold is the possible economic degradation of Europe and Japan. Gold may once again benefit as safe haven because of worries of currency devaluation," said Zachary Oxman, managing director of brokerage TrendMax.   

Spot gold was down 0.2 percent at $1,668.11 by 3:36 pm EST (2036 GMT).

US gold futures for April delivery settled down US$4.40 at US$1,666.90 an ounce, with trading volume almost 50 percent below its 250-day average, preliminary data showed.

Gold inched up less than 0.1 percent for the week after its Thursday drop as European Central Bank President Mario Draghi said that economic activity in the euro area should gradually recover later in 2013 but there are more negative risks than positive ones.

Spot silver fell 0.1 percent to US$31.42 an ounce.

Resilient physical demand, which lifted gold prices in early January, could underpin precious metals in the near term.

SPDR Gold Trust, the largest gold-backed exchange-traded fund (ETF), saw its first inflow since mid-January in the previous session, rising a modest 1.8 tonnes.

However, its holdings are down nearly 21 tonnes this year.

Holdings in the iShares Silver Trust were up 25.6 tonnes on Thursday, bringing its total inflow for the week to 67.86 tonnes. So far this year, its holdings were up 361.42 tonnes.

Platinum fell after rallying earlier this week to its highest price in more than a year and a half, as speculative investors started to take profits.

Spot platinum fell 0.1 percent to US$1,713.24 an ounce, after rising as high as US$1,740 earlier this week.

Palladium was up 0.4 percent at US$751.22. It touched its highest since September 2011 at US$769.50 an ounce on Wednesday.

Analysts said fundamentals appear strong for platinum group metals, used in auto catalysts and jewelry, due to a more positive economic outlook, mining disruptions in South Africa and a drop in palladium output from Russia.