Gold slips from one-week peak hit by stronger dollar

Gold prices fell on Friday as the US dollar rebounded, but the yellow metal was on track for a weekly gain underpinned by worries over a global economic recovery from the coronavirus-led slump.

Spot gold was down 0.8 per cent at $1,938.53 per ounce by 0308 GMT, after hitting its best level since September 2 at $1,965.94 on Thursday.

Gold has gained 0.4 per cent this week. US gold futures fell 0.8 per cent to $1,948.

"A rebound in the US dollar index sent gold prices lower following the European Central Bank's neutral tone last night," said Margaret Yang, a strategist with DailyFx, which covers currency, commodity and index trading.

"The mid- to-long-term outlook remains bullish for gold, despite recent consolidation. An ultra-loose monetary policy and low yield environment is cushioning the downside."

The dollar index bounced back on Friday following a steep drop against the euro in the previous session and was on track for its best week since mid-May. A stronger greenback makes gold more expensive for holders of other currencies.

Casting a shadow over hopes for a quick economic rebound, US weekly jobless claims hovered at high levels last week, suggesting a slowing labor market recovery. Gold prices have climbed 28 per cent this year as governments and major central banks pumped massive stimulus into the economy and kept interest rates low to alleviate the economic toll of the coronavirus.

The US Senate blocked a Republican bill that would have provided around $300 billion in new coronavirus aid, as Democrats push for more funding.

Investors' focus will now shift to British GDP data and US inflation data due later in the day. Elsewhere, silver dropped 1.2 per cent to $26.61 per ounce and palladium lost 0.7 per cent to $2,278.86.

Platinum eased 0.4 per cent to $922.43, but was heading for its best week since week-ending August 7, up three per cent.