Gold prices notch first weekly gain in four as Asian demand rises

By Devika Krishna Kumar and Zandi Shabalala

NEW YORK/ISTANBUL (Reuters) - Gold prices were little changed on Friday as a strong dollar limited gains, but the precious metal notched its first weekly rise in four as seasonal demand from Asia kicked in.

Demand from Asia, including China, India and exchange-traded funds (ETF), has helped prop up prices this week.

Spot gold (XAU=) was up 0.1 percent at $1,267.23 an ounce by 2:57 p.m. EDT (1857 GMT). For the week, prices rose 1.4 percent, clawing back part of the 6.6 percent shed over the last three weeks.

U.S. gold futures (GCcv1) ended the session up 0.02 percent at $1,267.70.

Demand from India is expected to remain elevated as festivals, including Dhanteras and Diwali, will be celebrated at the end of the month – two of the most important Hindu festivals and a time when gold is traditionally given as a gift, Commerzbank analysts said.

However, the dollar index (.DXY), which measures the greenback against a basket of currencies, was up 0.4 percent at 98.734 after touching its highest since February on Friday.

Bullion has been hurt in recent weeks by the strength of the dollar, which has been helped by a slew of data indicating an improvement in the U.S. economy that could justify an interest rate rise later this year.

Higher U.S. interest rates increase the opportunity cost of holding non-yielding assets such as bullion and create a flight to investments that may offer higher returns.

"The market right now, and for the rest of the year, is still focused on the U.S. interest rate hike. We mostly know it's likely to happen but we are looking at the economic signals ahead of it," Natixis precious metals analyst Bernard Dahdah said.

Holdings of the SPDR Gold Trust (GLD), the world's largest gold-backed ETF, rose 0.31 percent to 970.18 tonnes on Thursday. SPDR holdings have risen 2.3 percent so far this month.

MKS PAMP Group said in a note that ETF inflows continued to support gold. "However, dollar strength is likely to weigh upon moves higher over the short term amid euro and pound weakness."

The euro hit a seven-month low against the dollar after the European Central Bank poured water on a tapering of its asset-buying program, keeping the door open for more stimulus this year.

Silver (XAG=) rose 0.1 percent to $17.53 while platinum (XPT=) was down 0.1 percent at $932.8 an ounce. Palladium (XPD=) fell 1.6 percent to $619.22 after dipping to its lowest since July 12.

(Additional reporting by Nallur Sethuraman in Bengaluru; Editing by David Clarke and Dan Grebler)