Gold steady as $ slips, on track for second straight weekly gain

Gold held steady early on Friday on a weaker dollar and was on track for its second successive weekly gain.

Spot gold was up 0.1 percent at USD1,339.06 an ounce by 0425 GMT. The metal was set for a 1-percent gain this week.

U.S. gold futures were steady at USD1,342.20.

"Gold is going to follow the dollar so closely till the U.S. Federal Reserve meeting in September and could trade within a range of USD1,335-USD1,365," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.

The metal has given up much of its strong gains from earlier this week, when weak US jobs data led investors to bet that a September rate rise was no longer on the cards, weakening the dollar.

Gold is highly sensitive to rising US interest rates, which increase the opportunity cost of holding non-yielding bullion while boosting the dollar, in which the metal is priced.

The dollar index, which measures the greenback against a basket of currencies, was down 0.2 percent at 94.840.

Spot gold may retrace to USD1,327 per ounce as it failed to break a resistance at USD1,352, according to Reuters technical analyst Wang Tao.

The European Central Bank held interest rates at record lows and kept the door open to more stimulus on Thursday but gave few hints about its next move, disappointing markets that had priced in a decisively dovish tone.

Accommodative monetary policies favor gold and equities because low interest rates encourage investors to opt for assets that do not rely on interest yields.

"Gold prices have had ample of opportunity to sell-off, but there has been a lack of follow through selling. Conversely there has been regular dip buying," analysts at ScotiaMocatta said in a note.

"As such, we think Gold's bull market remains in force, but upside progress may be gradual. In turn, this means it may be more sustainable."

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.13 percent to 950.62 tonnes on Thursday.

Spot silver was nearly flat at USD19.60 per ounce.

Platinum rose 0.5 percent to USD1,087.50 an ounce. Platinum was on track for first weekly gain in six. It was up about 2.4 percent so far this week.

Palladium rose over 1 percent to USD689.24 and was on track for its first weekly gain in three.