LONDON (Feb 17): Gold crept higher on Friday as investors opted for the safe haven qualities of bullion due to uncertainty about US and European politics as well as the direction of stock markets.
Global equity markets lost momentum after setting record highs in the previous two sessions, partly due to disquiet about the policies of US President Donald Trump.
"Gold is close to its recent multi-month high despite the strong (US) dollar, due to an increase in volatility on the equity markets and more uneasiness on the political front, which is supporting the search for safe-haven assets," said Eugen Weinberg, head of commodity research at Commerzbank.
Spot gold gained 0.2% to US$1,241.66 per ounce by 1036 GMT, while US gold futures added 0.1% to US$1,242.80.
Gold, on track for a third week of gains, has risen about 7.5% in 2017.
Concern over Trump's policies, as well as elections in the Netherlands, France and Germany this year, fueled gold's rise to a peak of US$1,244.67 on Feb 8, the strongest in nearly three months.
"Dealers are extremely cautious about running the market higher as the March Fed rate hike debate will likely play out for the foreseeable future," said Stephen Innes, senior trader at OANDA.
Prospects of a stronger US dollar and US Treasury yields after Fed Chair Janet Yellen said US interest rates may need to be raised in March had dragged gold to US$1,216.41 on Wednesday, its lowest since Feb 3.
The dollar index, which measures the greenback against a basket of currencies, rose 0.2% to 100.68 on Friday, recovering from a one-week low of 100.41 the day before.
Holdings of SPDR Gold, the world's largest gold-backed exchange-traded fund (ETF), have risen 5.6% so far this month, the most since June 2016.
"The market seems to be quite supported by investment inflows into the ETFs and I think this will be the most important factor through the year as we expect investors to keep pouring money into gold ETFs," Weinberg added.
Commerzbank expects gold to hit US$1,300 by year end.
Spot silver dipped 0.4% to US$18.01 an ounce. The metal hit its strongest since Nov 11 at US$18.13 in the previous session.
Platinum gained 0.3% to US$1,015.50.
Palladium fell 0.3% to US$790.22. The metal, used in emission-controlling catalytic converters for the automotive industry, touched its best since Jan 24 at US$794.90 in the prior session. It has gained over 16% so far this year.