Gold and crude oil edged up on Friday, recovering from the worst day for commodities since early May on Thursday, but remain on track for weekly declines as investors worry over slower economic growth.
The US Federal Reserve's warning of a grim economic outlook and the International Monetary Fund's lowering of its global growth forecast prompted investors to reduce holdings of commodities as they fretted that demand for energy and industrial metals will slow.
The dollar fell against a basket of major currencies on Friday but is still near its highest level in seven months struck on Thursday.
London copper futures fell more than 2 per cent to hit their lowest since September 2010, while zinc and lead dropped to their weakest in over a year, as fears of a global recession continued to fuel a sell-off in base metals.
Gold is headed for a third straight week of decline.
Weaker factory output data from China added to earlier signs of slowing growth in developed nations to send commodities across the board lower on Thursday. The dollar gained as investors opted for the perceived safety of Treasuries.
"Everyone is derisking and putting money into the dollar because of the deteriorating economic outlook," said Soozhana Choi, head of Asia commodity research at Deutsche Bank in Singapore.
"We saw massive derisking across the board and gold as well as other commodities weren't unscathed."
The world's major economies pledged to prevent Europe's debt crisis from undermining banks and financial markets, and said the euro zone's rescue fund would be bolstered.
That came a day after Federal Reserve Chairman Ben Bernanke warned of significant downside risks for economic growth.
Americans filed fewer new claims for jobless benefits last week but the decline was not enough to dispel worries the economy was dangerously close to falling into a new recession.
Gold seems to have lost its safe-haven appeal, as it followed other commodities and sank more than 2 per cent on Thursday, marking its biggest one-day drop in two weeks.
Brent futures traded 71 cents higher at $106.20 by 0328 GMT. The contract is down nearly 5 per cent for the week, and is poised for its biggest weekly decline in seven.
US crude rose 32 cents to $80.83 a barrel, after rising as high as $81.71. It is down a little more than 7 per cent for the week in its first weekly decline in five.
"It is just a short-covering rally that we are seeing today," said Jonathan Barratt, managing director for Commodity Broking Services in Sydney. "Otherwise, the overall direction is weak. Oil has been moving in line with equities."
