TOKYO - Gold prices inched lower but held above $US1,200 an ounce as trading was subdued with investors looking for catalysts to break out of recent narrow ranges.
Gold has been stuck in a $US100 range between $US1,165 and $US1,265 since the start of May, with the band narrowing further to $US30, between $US1,190 and $US1,220, over the past two weeks.
The market has drawn support from euro zone sovereign debt problems, concerns about the global economy and a cautious stance towards risk-taking, all of which highlight bullion's appeal as a hedge.
Spot gold was $US1,206.60 per ounce as of 0519 GMT, compared to the late New York level of $US1,207.75.
Technically, spot gold signalled a neutral direction but with a downside bias.
The 25-day moving average, which has served as firm resistance, stood around $US1,222 on Friday.
One factor to watch in the near term was the trend in the holdings of gold-backed exchange-traded funds, Lee Cheong Gold Dealers director Ronald Leung said in Hong Kong.
The world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, said holdings eased to 1,314.211 tonnes as of Thursday, down 0.608 tonnes from the previous business day.
"A decline in the holdings is putting pressure on gold," Mr Leung said. "The market also sees prices as too expensive," as they are just a few dollars below a key resistance point of $US1,220, he said.
At current levels, gold was set for a weekly fall of 0.2 per cent. Gold rallied to an all-time high of $US1,264.90 an ounce on June 21.
US gold futures for August delivery were at $US1,206.50 per ounce, slightly down from $US1,208.30 on the COMEX.
With summer holidays approaching, trading is expected to thin later this month. Japanese financial markets will be closed on Monday for a national holiday and resume trading on Tuesday.
Mr Leung said firm support was seen at $US1,185-$US1,190.
"Investors don't know what to do after selling gold because they can't really put the money into other markets. So they are still holding certain amounts of gold in their portfolios," he said.
Japan's Nikkei share average fell more than two per cent on Friday as investors took profits before a long weekend, worried that the yen could advance further towards 15-year highs against the dollar on concern about the pace of US economic recovery.
The dollar index was near 2.5-month lows as investors continued to cut long positions in the greenback and shifted towards the euro.
