LONDON: Gold rose slightly on Friday, after hitting its weakest level in 2-1/2 months the day before, as violence in Ukraine weighed on equity markets and the dollar, but gains were capped by optimism about US economic growth. Ukrainian forces killed up to five pro-Moscow rebels on Thursday as they closed in on the separatists' military stronghold in the east, and Russia launched army drills near the border in response, raising fears its troops would invade. Spot gold was up 0.3 percent at $1,298.00 at 1051 GMT.
It hit a 2-1/2 month low of $1,268.24 on Thursday amid firmer equities and a weaker technical picture, before regaining strength due to renewed tensions between Moscow and Western powers over Ukraine.
US gold futures for June delivery gained 0.5 percent to $1,297.60 an ounce. The metal remains in a fragile situation as interest from long-term investors is still absent, analysts said.
"The fact that gold is unable to strongly benefit from safe-haven demand on Ukraine is in itself a bearish signal," Commerzbank analyst Carsten Fritsch said. The dollar fell 0.1 percent versus a basket of currencies, while European shares struggled due to the heightened tensions in Ukraine.
Gold tends to hold an inverse relation with equity markets, as investors seek refuge from riskier assets in times of political or financial troubles. "Stock markets movements remain key over the next few weeks and also US economic data and interest rates decision," Fritsch said.
Upbeat US durable goods data for March on Thursday which suggested the world's biggest economy was regaining momentum limited gold's gains.
Investors were now eyeing next week's US Federal Reserve Open Market Committee's meeting on interest rates for trading cues.
US economic reports are closely monitored for clues on the pace of the Fed's tapering of its stimulus measures which were put in place during the financial crisis.
The prospect of tapering was a key factor in gold's 28 percent drop last year.
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