Gold struggles to hold gains

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Gold struggled for gains Friday as strength in equities prompted investors to cash in some of the previous day's gains, remaining on track for its biggest weekly rise in five weeks as the Federal Reserve remained cautious on U.S. interest rate increases.

Global stock markets rebounded but still were set to end a bruising and volatile week lower, fed by growing uncertainty surrounding the U.S. economic and policy outlook.

Spot gold was nearly flat at $1,240.58 an ounce. U.S. gold futures for June delivery settled up 0.5 percent at $1,243.80 an ounce and last traded up 0.39 percent at $1,242.50.

A fund that tracks gold mining companies traded up 2.96 percent.

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Spot prices are up 1.4 percent this week, chiefly because of Thursday's 1.5 percent rally.

The metal has been hemmed into a narrow range by uncertainty about the path the U.S. central bank will take to raising interest rates.

"Gold prices rallied because the market anticipated a change in the Fed's rate hike outlook," said Stefan Wieler, vice president of GoldMoney in Vancouver. "Now the Fed says two hikes, the market thinks zero, and gold prices hover somewhere around $1,200-$1,250 until this question gets answered."

Fed Chair Janet Yellen, in a conversation with former Fed chairmen on Thursday, said the U.S. economy is still on track to warrant further rate rises. But U.S. interest rate futures still indicate a less than 20 percent chance of a rate increase in June.

Higher rates would weigh on gold by lifting the opportunity cost of holding non-yielding bullion. Waning expectations for further rate increases this year helped gold to its best quarter in nearly 30 years in the three months to March.

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"Janet Yellen said (the Fed) will be moderate in making hikes in the future, so the markets no longer anticipate the four interest rate hikes they did at the end of 2015," LBBW analyst Thorsten Proettel said.

Proettel said he remains bearish on prices, saying that positioning on the futures markets looks overstretched, while inflows into gold-backed exchange-traded products are drying up.

Data from the world's largest gold-backed exchange-traded fund — New York-listed SPDR Gold Shares — showed its holdings are little changed this week after posting the year's first weekly outflow last week.

Demand for physical gold from Asia also has been muted of late, analysts said.

In other precious metals, silver futures were up 1.4 percent at $15.37 an ounce, platinum futures gained 1.5 percent to $968.70 and palladium contracts rose 0.99 percent to $539.10.