Gold up on Greece bailout hopes; heads for weekly gain

By Rujun Shen

SINGAPORE (Reuters) - Gold prices rose on Friday as optimism that Greece may soon secure an urgently needed bailout buoyed financial markets and helped bullion recover from a one-week low hit in the previous session.

Gold, on course for a weekly rise of 0.8 percent, has moved in the range between $1,700 and $1,760 since the beginning of the month, closely tracking the progress and setbacks in Greece's struggle to obtain a 130-billion euro bailout.

Hopes that Greece has finally done enough to secure a second bailout after Athens set out extra budget savings demanded by its international lenders helped riskier assets rally in the last trading day of the week.

Technical signals may have turned upbeat for gold, said Nick Trevethan, senior commodity strategist at ANZ in Singapore.

"We're at the point where we have tried the downside three or four times in the past two weeks and failed. The frustration with failure to breach the $1,700-$1,710 level might put the focus back on resistance," he said.

Lofty oil prices on concerns about supply disruption from Iran are also expected to underpin sentiment in gold, he added.

Spot gold rose 0.2 percent to $1,732.39 an ounce by 0632 GMT. Gold touched a low of $1,705.09 in the previous session, lowest since February 10.

U.S. gold gained 0.3 percent to $1,734.30.

The data from the World Gold Council, showing that global gold demand in 2011 hit a 14-year high on investment, China buying and central bank purchases, also supported gold.

Gold, traditionally a safe-haven asset, has been tracking riskier assets in the past few months as the turmoil caused by the euro zone debt crisis forces investors to sell off their gold positions to cover losses elsewhere.

Though there is increased optimism on Greece's bailout deal, investors remained cautious as the euro zone is hardly out of the woods and its debt crisis can continue to disrupt the global financial markets.

"This week is the first week in a long run that we have such tight range," said a Tokyo-based trader, referring to the narrow range of around $32 for spot gold.

"People, especially in Asia have adopted the wait-and-see attitude. Until Europe decides what to do with Greece things will be quiet."

But he said the longer-term outlook for gold will stay rosy as the U.S. Federal Reserve has pledged to keep interest rates low until at least late 2014, boosting inflation outlook and supporting bullion.

Spot silver edged up 0.2 percent to $33.51, off a three-week low of $32.64 hit in the previous session. The metal remained the top performer of the complex with a 21 percent year-to-day climb.

Spot platinum gained 0.6 percent to $1,629.74, headed for a weekly decline of 1.4 percent, after six straight weeks of gains.

Spot palladium was flat at $690.97, but on course for its biggest one-week drop in six weeks.

(Editing by Himani Sarkar)