Gold rose in choppy dealings on Friday, hitting a six-week high and putting it on track for its biggest weekly climb since mid-January as more bad economic data from China rattled financial markets, pushing the U.S. dollar broadly lower.
World stocks tumbled towards their worst week of the year, while the dollar index hit its lowest in two months after Chinese factory data added to doubts that the U.S. Federal Reserve will raise interest rates next month.
The Chinese data spooked investors already worried about the slow pace of global growth, sending investors scurrying to the safety of bonds and gold, while precious metals that have industrial uses, such as silver and palladium, dropped after two days of gains.
Gold had already rebounded this week from July's 5-1/2 year low, boosted by minutes of the Fed's last policy meeting, which dented expectations for an imminent rise in U.S. rates.
hit a peak of $1,168.40 an ounce and was up 0.5 percent at $1,159.10, up 4 percent on the week. U.S. gold futures for December delivery settled up 0.6 percent at $1,159.60.
"The Chinese economic data release today has ... helped the metal, as this presages more headwinds for the Fed," said Naeem Aslam, chief market analyst at AvaTrade.
"However, now we do need a new catalyst to drive the price any higher and next week's economic data could certainly fulfill this craving," he said.
The white metals extended losses when gold briefly moved into negative territory. They are "suffering from the base metals hangover, lack of industrial demand syndrome," said Miguel Perez-Santalla, vice president of Heraeus Metal Management in New York.
"The early market pull-back was attributed to gold hitting the downtrend line, basically technical retracement," said Eli Tesfaye, senior market strategist for brokerage RJO Futures in Chicago.
Gold has come under heavy pressure this year from expectations that the Fed would raise rates for the first time in nearly a decade, lifting the opportunity cost of holding non-yielding bullion while boosting the dollar.
The world's largest gold-backed exchange-traded fund, New York's SPDR Gold Shares, reported an inflow of 3.6 tons on Thursday, its first rise in more than a week.