Gold hit a two-month high above $1,262 an ounce this week on renewed global economic concerns before losing some gains to profit-taking and better-than-expected U.S. data on jobless benefits. Silver was also off its highest since early 2008.
Spot gold fell $1.27 an ounce to $1,247.00 an ounce by 0559 GMT, after falling as low as $1,242.20 on Thursday, partly driven by technical selling from recent highs. Bullion, which struck record around $1,264 in June, is headed for a weekly drop of 0.2 percent, its first in six weeks.
"The trend still remains for a stronger gold and it probably looks to test $1,275," said Darren Heathcote, head of trading at Investec Australia in Sydney.
"But for the time being, there's a bit of safe-haven unwinding going on overnight as risk is back on following stronger U.S. data."
U.S. gold futures for December delivery dropped $2.1 to $1,248.8 an ounce. The all-time high on the December futures chart sits at $1,270.60 per ounce.
The International Monetary Fund said on Thursday it sold 10 tons of gold to the central bank of Bangladesh this week, its first sale after a 10-month hiatus, as a volatile U.S. currency draws holders to bullion.
The gold market is sensitive to buying by Asian central banks, Purchases by India, Mauritious and Sri Lanks helped boost prices earlier this year, while speculation China was in the market for IMF gold in February, ultimately unfounded, sent prices higher by 1 percent.
"If China were to move on to the open market, they wouldn't want to buy 299 tons, they'd need to buy 2,000 tons to diversify, and that would create so much buying pressure it would wreck the market," Mark Pervan, senior analyst at ANZ said.
Asian stocks hit a four-month high on Friday as some investors were inspired by positive U.S. and Japanese economic data to pick out bargains but worries about the health of European banks lingered.
"People sell gold to buy stocks. I don't think sentiment is bearish but it's a thin market, which gives gold no direction," said a dealer in Hong Kong. "There's a drop in ETF holdings but it's less than a ton."
The world's largest gold-backed exchange-traded fund, SPDR Gold Trust (GLD.P), said its holdings slipped to 1,293.531 tons by Sept 9 from 1,294.442 tons by Sept 3. The holdings hit a record at 1,320.436 tons on June 29.
The world's largest silver-backed exchange-traded fund, the iShares Silver Trust, said its holdings rose to 9,307.17 tons by Sept 9 from 9,276.73 tons on Sept 3.
But physical dealers said the rise in silver prices to above $20 this week was driven by speculative buying and not by purchases from the industrial sector.
In the energy market, U.S. crude for October jumped to near $75 after a leak forced Enbridge to shut down the biggest pipeline supplying Canadian oil to refineries in the Midwest.
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Source: http://www.reuters.com/article/idUSTRE67F05920100910
