Gold edges up as buyers slowly return after selloff

Gold edged higher on Friday as buyers trickled back to the market, drawn by this week's plunge of 5%, although bullion is still looking at its worst week since December after Wednesday's sell-off.

Fundamentals

* Spot gold edged up 0.2% to USD $1,720.55 an ounce by 0040 GMT, on course for a weekly decline of 3.4%, its biggest one-week fall since mid-December.

* US gold was flat at USD 1,722.20.

* US Federal Reserve Chairman Ben Bernanke and other top central bank officials highlighted risks to the economic recovery despite recent signs of strength, but offered few hints that any additional monetary stimulus might be needed.

* On Wednesday bullion prices tumbled 5% as Bernanke refrained from signaling further bond purchases, which had been one of the drivers sending gold prices up 10% so far this year.

* Prospects for a sustained global economic recovery dimmed on Thursday as manufacturing cooled in the United States and European factories sputtered at a time when central banks are running out of policy options.

* Holdings in gold-backed exchange-traded funds gained 238,674 ounces to a record high of 70.76 million ounces, suggesting investors remained keen in gold.

* Supporting sentiment in platinum group metals, US auto sales rose nearly 16 percent in February and annual sales rate leapt to its best level in four years.

Market News

* US stocks rose on Thursday, moving back to 2008 highs, after a jump in bank shares and further upbeat data on the labor market, though sharp gains in oil prices limited the advance.

* The euro was on the backfoot in Asia on Friday, having fallen to one-week lows against the greenback and other currencies in a move seen likely to continue after this week's massive cash injection by the European Central Bank.

* US crude futures traded steady on Friday, off a near 10-month high in post-settlement trade after a Saudi official was reported to have denied Iranian media pointing to an explosion at an unknown oil pipeline in Saudi Arabia.

Data/Events

0700 Germany Retail sales yy real Jan 2012

1000 Euro zone PPI Jan

PRICES

Precious metals prices 0040 GMT

Metal Last Change Pct chg YTD pct chg Volume

Spot Gold 1720.55 3.19 +0.19 10.02

Spot Silver 35.44 0.00 +0.00 27.99

Spot Platinum 1704.00 7.76 +0.46 22.33

Spot Palladium 711.22 -3.35 -0.47 9.00

COMEX GOLD APR2 1722.20 0.00 +0.00 9.92 2582

COMEX SILVER MAY2 35.52 -0.14 -0.40 27.24 389

Euro/Dollar 1.3327

Dollar/Yen 81.25

COMEX gold and silver contracts show the most active months