Singapore: Gold gave up early gains on Friday as shares in Asia slipped following a three-day rally and as investors took a breather ahead of the outcome of a summit on solving the euro zone debt crisis, which could support the euro.

Recent stimulus measures by central banks boosted gold's appeal as a hedge against inflation and sent prices to an 11-month peak of USD1,795.69 an ounce in early October, but a  rebound in the dollar and uncertainty in Europe later trimmed gains.

Gold hit an intraday high around USD1,743 an ounce before slipping to USD1,737.65, down USD3.44, as it headed for its second weekly fall. The metal struck a lifetime high around USD1,920 in September last year.

"There's some disappointment after (gold) could not pass through USD1,754 to USD1,755. And then a stronger dollar dragged down the market," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong, adding that dealers were also waiting for the outcome of the euro zone summit.

"I think gold just follows the U.S. dollar. At USD1,700, it seems quite a number of people want to buy at this level."   

Bullion has closely followed moves in currencies, with improving sentiment around the euro zone giving support to the euro and weighing on the greenback. That makes dollar-priced commodities more attractive for buyers holding other currencies.

"More time is required to build a new short-term bottom. We expect this to happen towards the middle of next week," Credit Suisse said in a report.

"In the meantime, a brief retest of the short-term support at USD1,730/USD1,732 is possible. The next short-term key support is at USD1,708/USD1,712."  

European Union leaders took a big stride towards establishing a single banking supervisor for the euro zone, striking a deal under which the bloc's rescue fund could start recapitalising ailing banks next year, a French government source said.

Creating an effective banking union, towards which this deal was a first step, is regarded by the International Monetary Fund and market economists as a key tactic in overcoming the euro zone's three-year-old debt crisis.

In other markets, the MSCI index of Asia-Pacific shares outside Japan eased 0.3 percent after rising 1 percent for a seven-month high on Thursday.

The euro hovered below a one-month peak against the dollar on Friday having been left unmoved by the European summit, while the yen wobbled near a two-month low against the dollar as speculation mounted over the possibility that the Bank of Japan would take fresh stimulus measures.

The physical gold market was subdued on Friday, with premiums unchanged at between 50 and 90 cents to the spot London prices in Hong Kong and dealers waiting for India to resume buying.

"Gold could see a seasonal up-tick in demand from India going into the festival season, but it is likely to be more subdued than previous years unless the Indian rupee appreciates," ANZ said in a report.

The festival season is underway in India, the world's largest gold consumer, and will peak with Diwali and Dhanteras next month. Weddings also take place during this period. Gold jewellery is an essential part of the dowry Indian parents give to their daughters at weddings.

Precious metals prices 0616 GMT

Metal             Last    Change  Pct chg  YTD pct chg    Volume

Spot Gold        1737.65   -3.44   -0.20     11.12

Spot Silver        32.69   -0.08   -0.24     18.06

Spot Platinum    1637.99   -1.01   -0.06     17.59

Spot Palladium    637.72   -1.28   -0.20     -2.27


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