SINGAPORE: Gold edged up 0.4 percent on Friday as investors used bullion to shelter from the storm engulfing financial markets on concern that the United States may be facing another recession and that Europe's debt crisis is spreading to some of its largest economies.
Gold fell as much as $40 an ounce from a record high on Thursday because investors needed to sell the precious metal to cover losses in other asset classes.
But as Asian stocks fell 3 to 4 percent on Friday, following Wall Street's worst sell-off in two years the previous day, gold began to rise again.
Spot gold added $6.74 an ounce or 0.41 percent to $1,654.84 an ounce by 0335 GMT, after hitting a record around $1,681 an ounce on Thursday.
"I don't hear anybody saying that the bears are coming," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.
"The market has dropped down too much, so bargain hunters are buying a little bit at the lower end. There doesn't seem to be too much change in sentiment."
Bullion prices have risen more than 15 percent this year. The need for investors to book those profits and boost liquidity may force prices lower in the next few days.
"Bullish sentiment in gold could be tempered as wary short-term investors look to take profits," said Ong Yi Ling, investment analyst at Phillip Futures.
"Investors will be watching the all important non-farm payrolls data that we will be getting today and whether the figures turn up worse than expected. It seems everyone is bracing for the worst."
U.S. economic data suggests growth in the world's largest economy was slowing from what was already a sluggish pace even before politicians agreed budget cuts. Investors await data later on Friday on U.S. jobs growth for July, which may show the impact of the political stand-off on debt.
Europe's debt crisis is threatening to swallow two of the continent's largest economies, Italy and Spain. European policymakers tried to turn a more powerful fire hose on the euro zone debt crisis on Thursday but financial markets were unimpressed with their response.
With few other places to go the metal still looks attractive to investors trying to maintain the value of their capital.
Citing enhanced contagion risk from the European debt crisis, Morgan Stanley lifted its 2011 gold price forecast to $1,511 an ounce from $1,401 and raised this year's silver price forecast to $36.21 an ounce from $31.39.
While spot gold rose, U.S. gold futures GCcv1 fell $1.2 to $1,657.8 an ounce -- nearly $30 off Thursday's record around $1,684 an ounce. It had dropped as low as $1,644.2 on Friday.
Oil markets were headed for their biggest weekly loss in three months on Friday on fears that a slower economy would mean less demand for fuel. The losses have erased oil's gains this year
.Base metals also dropped, with the most-active October copper contract on the Shanghai Futures Exchange SCFcv1 down more than 3 percent in early trading on Friday, catching up with overnight losses in London.
Precious metals prices 0234 GMT Metal Last Change Pct chg YTD pct chg Volume Spot Gold 1649.91 2.01 +0.12 16.24 Spot Silver 39.26 0.45 +1.16 27.22 Spot Platinum 1710.99 -6.81 -0.40 -3.20 Spot Palladium 743.97 2.79 +0.38 -6.95 TOCOM Gold 4174.00 148.00 +3.68 11.93 104959 TOCOM Platinum 4376.00 -105.00 -2.34 -6.81 21731 TOCOM Silver 98.90 1.10 +1.12 22.10 1938 TOCOM Palladium 1899.00 -171.00 -8.26 -9.44 767 COMEX GOLD DEC1 1631.20 15.00 +0.93 14.76 136930 COMEX SILVER SEP1 40.11 0.31 +0.78 29.63 44407 Euro/Dollar 1.4118 Dollar/Yen 78.58 TOCOM prices in yen per gram. Spot prices in $ per ounce. COMEX gold and silver contracts show the most active months. -Reuters
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