SINGAPORE: Gold edged lower on Friday, but jitters about whether Greece was edging closer to default and economic spill over from the country's debt crisis could still spur safe haven buying.
Greek Prime Minister George Papandreou fought to form a cabinet to avoid defaulting on the national debt and postponed announcing the cabinet until Friday, in a sign of how difficult his task is.
Spot gold hit a high around $1,530 an ounce before slipping to $1,526.50 by 0603 GMT, down $1.85. Down 0.3 percent on the week, the metal is heading for its second consecutive weekly drop.
"In the last 48 hours, it's just floundering, trying to work out what it wants to do. If anything, the strength of the dollar and the political fears are just getting the bulls and bears at loggerheads," said Jonathan Barratt, managing director of Commodity Broking Services.
The dollar index slipped to 75.598 from a three-week high of 76.015 after the European Union's top economic official, Olli Rehn, said he expected the EU and the IMF to release a crucial 12 billion euro loan tranche in early July to keep Athens afloat.
Any solution to Greece's debt woes must avoid the coercion of bondholders or a default, European Central Bank President Jean-Claude Trichet was quoted as saying on Friday.
Gold is 3 percent below a lifetime high around $1,575 touched in early May. Recent gains were driven by debt problems in Europe, inflation fears in China following strong economic data, and worries about a US economic slowdown.
Investors await the US Federal Reserve's Federal Open Market Committee's announcement on interest rates on June 22.
The Fed last November announced a programme to buy $600 billion in Treasuries to help push long-term interest rates lower and stimulate the economy. That programme will end June 30.
The physical market saw sales of gold scrap, while top consumer India was in a lean spell as farmers were busy sowing seeds during the monsoon season.
"Surprisingly, I am getting scrap from Thailand. I mean, I got some physical requirement from them yesterday, but today, they are selling. I guess the market is sideways because volume-wise, it's pretty low," said a dealer in Singapore.
"Indonesia was a good buyer at the beginning of this week, but they started to quiet down after the market went up to the $1,530s. There's nothing much from India either."
Silver was flat at $35.29 an ounce, below a record at $49.51 an ounce in April.
Platinum group metals tracked industrial metals higher. For the week, however, palladium was down more than 6 percent.
Holdings of the largest silver-backed exchange-traded-fund (ETF), New York's iShares Silver Trust, fell 0.27 percent from Wednesday to Thursday, while, the largest gold-backed ETF, New York's SPDR Gold Trust , remained unchanged for the same period.
Copyright Reuters, 2011