Gold rally stalls as firmer dollar hits commodities
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Oct 10 (Reuters) - Gold edged lower on Friday as a rise in the dollar capped four days of gains, though the metal remained supported around the $1,220 level by the prospect of a widespread economic slowdown that could keep interest rates low.
Strength in the U.S. currency drove commodities lower across the board, with Brent crude oil futures earlier tumbling more than 1 percent towards a four-year low, while worries about the world economic outlook hit stock markets.
Brent crude ended slightly higher and S&P 500 index tumbled more than 1 percent.
Even with the Friday's weakness, gold posted its biggest weekly rise in four months at 2.8 percent, helped by easing fears over interest rate hikes by the Federal Reserve and tumbling equity prices.
"Gold's recent gains are attributed to a covering of short positions from momentum investors which led to a pare back in losses from the year-to-date low of $1,183 an ounce on Oct 6," said James Steel, chief metals analyst at HSBC.
Spot gold was down 30 cents at $1,223.45 an ounce by 3:58 p.m. EDT (1958 GMT), while U.S. COMEX gold futures for December delivery settled down $3.60 an ounce at $1,221.70.
Gold hit a 15-month low of $1,183.46 on Monday after last week's strong U.S. jobs data fueled talk that U.S. interest rates could rise sooner rather than later.
The gold recovery gained momentum after minutes of the Fed's September meeting, released on Wednesday, showed that officials were struggling with how to deal with the dual threats of a stronger dollar and a global slowdown.
The minutes prompted investors to bet that the U.S. central bank is in no rush to tighten policy after years of monetary stimulus. Higher interest rates would hurt demand for gold, a non-interest-bearing asset.
The dollar rose on Friday, but ended a record-length rally with its first weekly fall in three months after Fed policymakers warned about the impact of the currency's strength.
On the main markets for physical gold, dealers reported a pick-up in Indian demand ahead of the Diwali festival, a key bullion-buying period.
Among other precious metals, silver was up 0.2 percent at $17.33 an ounce, while spot platinum was down 0.8 percent at $1,254 an ounce, and spot palladium was down 1.3 percent at $780.10 an ounce.
Platinum prices, which tumbled to their lowest in five years on Monday in sympathy with gold, still posted their biggest weekly gain since February, up 3.1 percent. (Additional reporting by Clara Denina in London; Editing by David Clarke and Jane Baird)
