SINGAPORE (REUTERS) - Gold gained half a percent on Friday after the euro rebounded from a 10-month low against the U.S. dollar, while steady purchases from jewellers in Asia offered additional support. Bullion has dropped more than $10 this week, mainly due to a rally in the dollar and uncertainty over a bailout package for debt-ridden Greece, but an increase in ETF holdings showed gold still attracted investors as currencies remained volatile. The world's largest gold-backed exchange-traded fund, SPDR Gold Trust (GLD), said its holdings stood at 1,124.647 tonnes as of March 25, up 4.568 tonnes from the previous business day. Spot gold was at $1,096.20 an ounce by 0632 GMT, up $5.85 from New York's notional close on Thursday. Gold had dropped to a 6-week low of $1,084.85 on Wednesday but was above the 200-day moving average. Gold started trading at around $1,088 on Friday and hit an intraday low of $1,087.85 before stabilising at current levels as dealers saw covering from jewellers and the industrial sector in Asia as well as speculative buying driven by firmer stocks. "We've seen physical buybacks in the market. It's not only in Hong Kong," said Dick Poon, manager of precious metals at Heraeus in Hong Kong. Sentiment was neutral because a stronger dollar could still spur selling in gold but on the other hand, physical buyers were happy to buy on dips, said Poon. "We're seeing strong demand on the physical side." U.S. gold futures for April delivery GCJ0 rose $3.6 an ounce to $1,096.50 an ounce. In the physical market, jewellers pushed premiums for gold bars higher in Hong Kong, while main consumer India was stocking up as the wedding season begins again in April. Dealers also noted active buying from jewellers in Indonesia and Thailand. The euro recovered from a 10-month low after euro zone leaders agreed on a safety net for Greece which included the IMF. Euro zone leaders agreed on a joint European-IMF financial safety net for Greece after weeks of wrangling. The euro rose 0.5 percent against the dollar from late U.S. levels to $1.334 after hitting its weakest level since early May at $1.3267 on trading platform EBS. The dollar index .DXY, which measures the greenback's performance against six other major currencies, hovered just below a 10-month high at 82.240 after gaining sharply in the past few days as U.S. yields have risen. "I do think we might get a little bit of a recovery in euro which will help it. I still maintain the feeling that we'll see it bounce again," said Darren Heathcote, head of trading of Investec Australia in Sydney, who expected bullion to regain to $1,100 next week. "Probably there will be more buying on the dips. We'll look the trend to resume," said Heathcote, referring to physical buying. Dealers said physical demand for gold rose in India, the world's biggest bullion consumer, after prices fell to attractive levels ahead of the wedding season in April. Japan's Nikkei average surged 1.6 percent to its highest close in about 18 months on Friday, with exporters buoyed by the yen's recent dip to two-month lows against the dollar. Oil climbed towards $81 on Friday after an agreement to create a safety net for Greece.

Source