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Gold prices set for first weekly gain since September

AP

Gold barely budged on Friday as rising demand from Asia was offset by a strong dollar but the precious metal remained on track for its first weekly rise since the week ending Sept. 30.

Gold has been hurt in recent weeks by the strength of the dollar, which has been helped by a slew of data indicating an improvement in the U.S. economy that could justify an interest rate rise later this year.

Higher U.S. rates increases the opportunity cost of holding non-yielding assets such as bullion and creates a flight to investments that may offer higher returns.

Spot gold was up 0.06 percent at $1,266.66 an ounce. It was headed for a weekly gain of 1 percent.

U.S. gold futures settled at $1,267.70 per ounce.

Gold demand from Asia, including China, India and exchange-traded funds (ETF), has helped prop up prices this week.

"There is accelerating physical gold demand in Asia and particularly in India which has helped prices," Commerzbank commodity analyst Carsten Fritsch said, adding that Indian demand had improved after lacklustre sales last year.

However, the dollar index, which measures the greenback against a basket of currencies, was up 0.35 percent at 98.658 after touching its highest since February on Friday.

"The market right now, and for the rest of the year, is still focused on the U.S. interest rate hike. We mostly know its likely to happen but we are looking at the economic signals ahead of it," Natixis precious metals analyst Bernard Dahdah said.

Holdings of the SPDR Gold Trust, the world's largest gold-backed ETF, rose 0.31 percent to 970.18 tonnes on Thursday.

SPDR holdings have risen 2.3 percent so far this month.

MKS PAMP Group said in a note that ETF inflows continued to support gold. "However, dollar strength is likely to weigh upon moves higher over the short term amid euro and pound weakness."

The euro hit a seven-month low against the dollar after the European Central Bank poured water on a tapering of its asset buying programme, keeping the door open for more stimulus this year.

Spot silver fell 0.2 percent to $17.48.Platinum was down 0.4 percent at $930.60. Palladium fell as much as over 1 percent to touch a low of $621.50, its worst since July 13.