Spot gold XAU was up a touch at $667.20/667.70 an ounce at 1030 GMT from $667.00/667.50 late in New York on Thursday, when it sank to $664.00, the lowest since April 4, on a dollar rally and a sell-off in equity markets.
“It seems to have calmed down, people are waiting for US data,” a trader said. “(The data) could affect the thinking on US interest rates, the dollar and gold. The market is ignoring higher oil prices.”
US producer prices and retail sales for April are due later on Friday.
A stronger US currency makes dollar-denominated metals more expensive for investors in other currencies, while gold is often used as a hedge against oil-led inflation.
But analysts say stock market losses and a firmer dollar -- hovering near one-month highs against the euro -- point to a nervous mood among investors, who are likely to sell their holdings, including gold, much as they did earlier this year.
“There’s a whiff of risk aversion in the air and that seems to be encouraging people to reduce risk,” said John Reade, analyst at UBS, adding that many asset prices had returned to levels before the correction started in February.
Late in April gold touched $693.6, the highest since the middle of May. Losses since have been triggered by investor selling on disappointment with the metal’s failure to breach the psychological $700 level.
Gold bulls expected prices would eventually test the 26-year highs of $730 an ounce set last May.
But that hope faded and gold’s prospects could deteriorate further if US Treasury Secretary Henry Paulson’s support for a stronger dollar is the beginning of a new trend.
Analysts also cited heavy sales by European central banks for gold’s decline. The Bank of Spain on Thursday said it sold 1.3 million ounces of gold from its reserves in April and another 1.3 million ounces in March.
Another major indicator of investor sentiment is the volume of flows into and out of exchange-traded gold funds.
The New York-listed StreetTracks gold fund GLD.N, the world’s largest gold ETF, which accounts for about 80 percent of the metal jointly held by such funds, lost more than five tonnes between Wednesday and Thursday.
“We tend to concur with the ETF trends,” JPMorgan said in a note. “Combined with a weak volatility environment the most likely outcome in the very short term is further selling on rallies towards the top end of the $685-$695 ounce range.”
In other precious metals, silver XAG slipped to $12.93 an ounce, the lowest since March 15, before recovering to $12.99/13.03, compared with $13.04/13.09 late on Thursay.
Platinum XPT rose to $1,315/1,320 an ounce from $1,310/1,315 in New York. Earlier it hit a one-week low of $1,306. Palladium XPD saw a one-month low of $357 and was last quoted at $360/363 an ounce from $358/361.