Gold rallied on Friday after a sharp pullback the four previous sessions, supported by US economic data, while a weaker dollar triggered some buying but it was still on track for its worst week in almost three months.
Spot gold rallied as much as 1.63 percent to $1,595.30 and then traded at $1,589.54 by 3.03pm UAE time, off a two-and-a-half month low of 1,560.36 hit in the previous session.
US gold rose almost 1 percent to $1,592.50.
Better-than-expected US job data on Thursday suggested a weak US economy is gradually improving and supported financial markets.
A slightly weaker dollar against a basket of currency was also helping precious metals.
A softer US currency makes dollar-priced commodities such as gold, more affordable for holders of other currencies.
Bullion however was still on track for a 7 percent loss this week, the biggest loss since the end of September, and remained vulnerable to a deepening euro zone debt crisis and raising funding stress.
“Gold took a beating this week and today bounced a bit as investors see this as a good moment to buy but is still vulnerable,” Credit Agricole analyst Robin Bhar said.
“I expect gold will stay under pressure as the funding stress is increasing the need of liquidity and gold is seen as one of the assets to liquidate.”
The need for cash has overwhelmed gold’s traditional status as a safe haven in last few months, putting the metal on course for its first quarterly fall since end-September 2008 when the global credit crunch was at its worst.
Helping market sentiment Spain saw solid demand for its bonds on Thursday, helping to ease concerns it could be among the next to fall in the euro zone’s debt crisis.
Gold would benefit from money printing, diversification from money managers and all measures bound to alleviate funding stress, analysts said.
“With access to liquidity being constrained, market participants have increasing problems to refinance,” Credit Suisse said in a research note.
“As a result they have to sell their assets – including precious metals – to raise the much needed cash. This is the main reason why gold prices fall on days of increasing funding stress.”
In other precious metals, spot silver gained more than 2 percent to $29.76 an ounce, before easing to $29.70.
Spot platinum rose as much as 1.51 percent to $1,425.30, before trading at $1,422.80.
Palladium went up more than 2 percent to a session high of $627 an ounce and then eased to $623.72.
“As well as tracking gold, for platinum and palladium there are fears over weak industrial growth and they may be hit harder as people look to liquidate risk,” Bhar said.
“Some support however comes from costs. These metals are already trading very close to their costs.”
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