(Releads with updated with New York prices, adds trader
comment, NEW YORK to dateline and byline)
By Jan Harvey and Carole Vaporean
LONDON/NEW YORK, June 13 (Reuters) - Gold edged higher by
the end of trade on Friday, as buyers covered short positions
before the weekend and pulled prices up from lower levels that
dominated much of the session, traders said.
The firmer dollar against the euro and lower crude oil
prices limited gold's gains, they added.
Investors awaited the outcome of this weekend's meeting of
G8 finance ministers.
Any further comment on inflation at the meeting may fuel
expectations for a U.S. rate hike, which could strengthen the
dollar, pressuring gold.
The precious metals tend to move in opposite direction to
the dollar, as it is often bought as a hedge against weakness
in the U.S. currency.
Gold had risen to $870.20/872.20 an ounce by 1625
EDT (2025 GMT), from $867.55/869.55 late in New York on
Thursday.
New York August gold on the COMEX division of New
York Mercantile Exchange rose in late business to finish up
$1.10 at $873.10 an ounce, after hitting a low at $861.50.
"You had a bit of a short-covering rally in the latter part
of the day. There was a lot of volatility. Today, it was just
some technical squaring for positions over the weekend after a
significant down week," said Frank McGhee, head precious metals
trader at Integrated Brokerage Services LLC.
The dollar put in for its strongest week in three years on
the back of rising speculation of a U.S. interest rate hike,
shedding just over 4 percent since Monday.
"With the stronger U.S. dollar environment, gold has been
under a lot of pressure," said Dan Smith, an analyst at
Standard Chartered.
A dip in crude prices is also helping dampen interest in
the precious metals. Gold typically moves in line with crude as
it is bought as a hedge against oil-led inflation.
INFLATION HEDGE
Nonetheless, with the dollar remaining broadly weak, the
outlook for interest rates uncertain, and inflation on the
rise, analysts remain broadly positive towards the outlook for
gold.
While in the short term, an uptick in inflation may
pressure gold as it raises expectations rates will rise, in the
longer run gold's value as an inflation hedge is likely to
encourage fresh buying of the precious metal.
Smith at Standard Chartered points to a rise in holdings by
exchange traded funds (ETFs) - vehicles which trade securities
backed by physical metal - as evidence that fund demand is
strong.
Gold held by New York's StreetTRACKS Gold Shares, the
largest gold ETF, rose by 7.66 tonnes on Thursday to 605.21
tonnes, a seven-week high.
"Investors are obviously still interested in gold for
inflation hedging purposes and safe haven purposes," said
Smith.
Analysts are also sceptical over whether the dollar's
recent uptick represents a sustained bounce.
"With U.S. real interest rates in negative territory and
the deterioration in the US basic balance, we would view any
short-term strength in the US dollar and gold price weakness as
likely to be short-lived," said Deutsche Bank in a note.
Spot platinum rose to $2,028.00/2,043.00 an ounce
from $2,010.50/2,030.50 late in New York.
"With no significant fundamental news from South Africa,
the dollar should continue to dictate price movements," said
analyst Manqoba Madinane at Standard Bank in a note.
Silver climbed to $16.52/16.61 an ounce in late New
York dealings against $16.44/16.54, while spot palladium
rose to $448.50/456.50 an ounce against $433.50/441.50.
(Reporting by Jan Harvey; additional reporting by Carole
Vaporean in New York; editing by Marguerita Choy)
