NEW YORK—Gold bounced off a three-week low, but stayed below $1,600 an ounce as low physical demand maintained pressure on the metal.
The most actively traded contract, for August delivery, was recently up $3.50, or 0.2%, at $1,569.00 per troy ounce on the Comex division of the New York Mercantile Exchange.
Gold futures settled at a three-week low Thursday as market participants were disappointed that the Federal Reserve did not implement more robust stimulus programs.
Investor optimism for stronger Fed action had boosted gold leading up to the Fed's Wednesday statement. Gold can benefit from central bank actions to spur economic growth, because traders can use gold to hedge against the inflation that can stem from monetary easing.
A weaker dollar bolstered gold Friday by making the dollar-denominated metal more affordable to traders using other currencies. The ICE Dollar Index, which tracks the dollar against various other currencies, was recently down 0.2%, at 82.181, in New York.
Demand for physical gold continues to be weak in India, where a weak rupee has pushed gold prices near their all-time high. "A rapid recovery of gold demand in the world's second-most important gold consumer country is not likely, which should continue to dampen the gold price for the time being," said Commerzbank in a note.
Meanwhile, silver continued to slide Friday after hitting a 16-month low the previous session in response to sagging manufacturing data from China and Germany. Silver, which has more industrial uses than gold, is more vulnerable to manufacturing and consumer demand.
The most actively traded silver contract, for July delivery, was recently down 3.9 cents, or 0.2%, at $26.800 a troy ounce on the Comex division of the New York Mercantile Exchange.
"In light of silver industrial demand slowing down and investment demand failing to plug the gap, it is the precious metal most vulnerable on the downside," Barclays' BCS +1.61% Suki Cooper said of silver in a note.
