By Lewa Pardomuan
SINGAPORE (Reuters) - Gold rallied more than 2 percent on Friday as its rebound to $1,400 an ounce spurred technical buying, but bullion was still heading for a fourth week of losses after a brutal sell-off shattered investors' confidence.
Gold has been caught in a tug-of-war between physical buyers seeking bargains and wary investors cutting exposure to the precious metal on nagging worries about central bank sales and prospects of easing inflation.
Gold hit a session low around $1,385 before gaining strength to $1,414.30 by 0715 GMT, up $23.55. Dealers also noted physical buying, even though prices had gained more than $100 since hitting a 2-year trough earlier this week.
"Prices have suddenly jumped but I guess it's because gold has broken the $1,400-level again. Technically, people are just buying up again," said a physical dealer in Singapore.
"Physical buying from Thailand is not that strong, surprisingly. We are seeing demand from Indonesia and local buyers, and a also little bit from India."
Gold investors are waiting for the 1930 GMT release of U.S. CFTC data showing the latest trading by hedge fund and money managers for more cues.
The drop in prices ignited a spate of buying in gold coins, nuggets and bars, sending premiums for gold bars to multi-month highs in Asia. Buying also improved in top consumer India after a lacklustre start.
"This gives us some confidence that as panic selling passes, prices can rebound by $100 to $150 an ounce and trade in the $1,400 to $1,550 range over the next 3 to 6 months," said Mark Pervan, global head of commodity strategy at ANZ, referring to a pickup in physical gold sales in India and China.
"A key factor to watch will be gold (exchange-traded fund) ETF holdings, with a stabilisation in ETF holdings and then fresh ETF buying to restore some of the lost confidence for longer term gold investors."
For a 24-hour gold chart analysis: http://graphics.thomsonreuters.com/WT1/20131904100839.jpg
Inflation adjusted gold price timeline (since 1970): http://link.reuters.com/jem47t
Commodities performance in 2013: http://link.reuters.com/reb25t
Gold demand in China: http://link.reuters.com/bat34t
Gold vs Global Mining equities (DS): http://link.reuters.com/sas36s
Gold in currencies: http://link.reuters.com/cyv95s
U.S. gold futures for June delivery also staged a modest rally, standing at $1,414.30 an ounce, up $21.80.
Selling on COMEX, blamed on the outflows on gold-backed ETFs, was responsible for a rout in the cash market. Spot gold recorded its biggest ever daily fall in dollar terms on Monday, catching gold bulls, speculators and veteran investors by surprise.
Holdings of the SPDR Gold Trust, the world's largest gold-backed ETF, are at their lowest in three years, and there was also speculation hedge fund manager John Paulson, a prominent gold bull, might have liquidated his huge gold stake.
Gold has ignored tension in the Korean peninsula and investors are increasingly convinced the U.S. Federal Reserve will soon end its bullion-friendly bond buying programme, which could ease inflationary pressure.
It rallied to an 11-month high in October last year after the Fed announced its third round of aggressive economic stimulus, raising fears the central bank's money-printing to buy assets would stoke inflation.
Cyprus' plan to sell excess gold reserves to raise around 400 million euros also led to speculation other indebted euro zone countries could follow suit.
In other markets, Asian shares and oil prices climbed on Friday, but more soft U.S. economic data and mixed U.S. earnings sustained worries over global growth at the end of a volatile week that began with a broad sharp sell-off.
Precious metals prices 0715 GMT
Metal Last Change Pct chg YTD pct chg Volume
Spot Gold 1414.30 23.55 +1.69 -15.54
Spot Silver 23.58 0.34 +1.46 -22.13
Spot Platinum 1438.00 15.50 +1.09 -6.32
Spot Palladium 677.00 10.50 +1.58 -2.17
COMEX GOLD JUN3 1414.30 21.80 +1.57 -15.60 52929
COMEX SILVER MAY3 23.56 0.31 +1.33 -22.08 9295
COMEX gold and silver contracts show the most active months
(Additional reporting by Manolo Serapio Jr. Editing by Richard Pullin and)