Gold at highest since May 1 on political uncertainty, dollar

Gold hit its highest in nearly four weeks on Friday in response to a weaker dollar and political uncertainty that led investors to shun riskier assets in favour of bullion.

"We have had the political noise coming from Trump and the US administration and there is a certain element of uncertainty in the markets in general, which is supporting gold. Equities are also down," analyst Carsten Menke at Julius Baer in Zurich said.

Leaders of the world's rich nations face difficult talks with Donald Trump at a G7 summit in Sicily on Friday after the US president lambasted NATO allies and condemned German trade policies a day earlier.

Gold is used as an alternative investment during times of political and financial uncertainty.

Spot gold had gained 0.8 percent to USD 1,265.59 per ounce by 1213 GMT, the highest since May 1. U.S. gold futures gained 0.7 percent to USD 1,265.40 an ounce.

Menke expects gold to remain rangebound with a price target of USD 1,200 in three months.

"The headwinds are coming from US monetary policy. We do expect a rate hike in June and we see the dollar strengthening again. On the upside, there's a lot of uncertainty, which keeps people from selling gold and maybe causing a little bit of buying."

The big data points for the day will be the Q1 GDP figures from the United States as well as the durable goods figures, Jordan Eliseo, chief economist at ABC Bullion, said.

"We did issue a buy recommendation on gold some two days ago and will stick with that for the time being, especially considering how well the complex held up in Thursday's session against a variety of headwinds," INTL FCStone analyst Edward Meir said in a note.

The dollar was slightly weaker against the euro, which boosts the buying power of euro zone gold investors.

Among other precious metals, spot silver was up 0.7 percent at USD 17.24, platinum was 1.1 percent higher at USD 956.55, while palladium rose 1 percent to USD 778.50.

Silver has risen about 2.7 percent this week and is on track to mark its biggest weekly rise since mid-April. Platinum is up 1.2 percent for the week and is set to notch its third straight weekly rise.

Palladium has gained 1.8 percent this week and is on track for its first weekly gain this month.