LONDON: Gold edged up on Friday but remained subdued near a five-week low and was headed for a second straight week of losses, as a strong dollar after robust economic data offset a fall in equities due to rising political tensions.
Spot gold was up 0.2 percent at 1,295.90 an ounce by 1059 GMT, after losing nearly 1 percent on Thursday, when it hit its lowest since June 19 at $1,287.46.
US gold futures were up $5.20 to $1,25.80 an ounce.
Gold has lost 1.3 percent of its value so far this week, following a two percent fall in the previous one, mostly on speculation that an improving employment sector in the United States could signal an early rate increase by the Federal Reserve. Higher interest rates would encourage investors to switch to assets that, unlike gold, pay interest.
"The little bounce at the moment is just due to players covering a few shorts after gold managed not breach the 200-day moving average at $1,286 in the previous session, which has been a focal point in numerous occasions over the past few months," Saxo Bank senior manager Ole Hansen said.
The market is awaiting the release of July US non-farm payrolls and the Federal Open Market Committee, both scheduled for next week.
"Next week we have the FOMC and US jobs numbers and with the way the US economy has been performing recently I would imagine that the risk for a good number would lead to more speculation about interest rates tightening," Hansen added. "On that basis the near-term upside for gold is probably limited."
The dollar was up 0.1 percent against a basket of main currencies, while European shares were weighed by weak German economic data. Bullion came under further pressure after data on Thursday showed the number of Americans filing new claims for unemployment benefit fell to the lowest level in nearly 8-1/2 years last week, suggesting the labour market recovery was gaining traction.
In China, factory activity expanded at its fastest in 18 months in July, boosting global equities. "Positive economic data put a dampener on the gold market, as risk assets caught a bid and safe-haven buying dried up," ANZ said in a note.
Gold had managed to stay above $1,300 an ounce for most of this week as violence continued in Gaza, and tensions between the West and Russia over Ukraine remained high.
As a gauge of investor sentiment, holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 3.6 tonnes on Thursday - the biggest one-day drop in more than a month.
In the physical market, buying picked up slightly in the previous session as prices dipped below $1,300, but demand was still much weaker than was seen last year. Silver, platinum and palladium were also headed for weekly losses, with spot silver down 1.6 percent for the week.
It was up 0.8 percent at $20.48 an ounce, having touched its worst since June 19 at $20.26 in the previous session. Platinum was up 0.4 percent at $1,468.99 an ounce, while palladium rose 0.5 percent to $870.20 an ounce.
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