Gold eases to $1,670 amid biggest rally since Feb

Gold prices eased towards $1,670 an ounce on Friday, pausing in their biggest one-week rally since late February, after weaker than expected Chinese growth data lifted the dollar and dented appetite for assets seen as higher risk. Spot gold was down 0.2 percent at $1,671.20 an ounce at 12.12pm UAE time, while US gold futures for June delivery were down $8.00 an ounce at $1,672.60. The metal is still on track to rise 2.5 percent this week after a soft US jobs report last Friday stoked expectations for new quantitative easing measures. Ultra-loose US monetary policy was a key driver of record gold prices last year. However, a rebound in the dollar on Friday took the wind out of the precious metal\'s sails. \"There has been a steady trickle of positive new stories that seem to have picked gold\'s spirits up a bit and moved it into a higher range, but it is still a relatively muted performance,\" Sharps Pixley chief executive Ross Norman said. \"There has been steady U.S. dollar strength, and I think that will be an ongoing story throughout the year,\" he said. \"Investment demand remains pretty robust, but the strength of the US dollar in an election year is likley to continue to be a drag on runaway gold prices.\" The dollar was up 0.3 percent against the euro after Chinese growth data disappointed traders positioning for a strong showing, weighing on the single currency and other assets seen as higher risk. A report released Friday showed China\'s economy grew at its weakest pace in nearly three years in the first quarter, with annual rate of expansion easing to 8.1 percent from 8.9 percent in the previous three months. European shares resumed their decline after the data, breaking two sessions of gains, while crude oil prices slipped and safe-have German bund futures rose. Gold is expected to remain closely tied to the dollar on Friday. A stronger dollar tends to weigh on gold, as it makes dollar-priced commodities more expensive for other currency holders, and curbs the metal\'s appeal as an alternative asset. \"Gold will in our view continue to trade alongside the broader market today and against the U.S. currency, as attention turns to US CPI estimates this afternoon,\" VTB Capital in a note. Gold is on track to rise nearly 7 percent this year but has struggled to gain momentum after a strong showing in January as expectations for a further round on monetary easing fluctuate. Swiss bank UBS said in a note that if gold reverts to the safe-haven trading pattern it followed for much of last year, light speculative positioning, a run of softer than expected US data and troubles in the euro zone may represent the ingredients for a fresh rally. \"Options activity this week suggests something is brewing,\" UBS said. \"There has been a good deal of interest in upside options, particularly for $1800 June calls, with gold\'s safe haven performance on Tuesday the likely catalyst.\" \"But in order to capitalise on Europe\'s renewed woes and the softer US data, gold needs to start behaving as a safe haven again. A one-day performance is not enough.\" Physical buying in Asia\'s bullion market slowed to a trickle on Friday, as higher prices pushed traders to the sidelines, but a gold-buying festival in India in late April is likely to help bring in some demand from the world\'s top consumer of the metal. Silver was down 0.2 percent at $32.26 an ounce, spot platinum was down 0.5 percent at $1,589.94 an ounce and spot palladium was down 0.2 percent at $647.20 an ounce. CME Group, the biggest operator of US futures exchanges, said it will cut margins for COMEX silver futures for the second time since February in an attempt to boost liquidity after a narrow price range tempered trading interest.