LONDON: Gold was almost flat on Friday, set for its biggest weekly loss in two months, but prices were still in sight of recent 11-month highs as wider markets sought clarity on when and whether Spain would request a bailout to shore up its finances. Standard & Poor's cut the country's credit rating to one notch above junk on Wednesday, while the country's economy minister said on Friday there was no political resistance to a bailout request for within the euro zone. Spot gold was broadly flat at $1,767.89 per ounce at 1112 GMT. The metal was set for a weekly decline of 0.7 per cent, its biggest weekly drop in since Aug 5. US gold futures were also lower at $1,769.10. "What's happening is that the market is taking a breather after losses from the start of the week to consolidate," VTB Capital analyst Andrey Kryuchenkov said, adding that prices could drift lower towards to $1,760. "Investors are very cautious; exchange-traded products are near record highs, long speculative positions are substantial and they showed little reaction to Spain's downgrade," he said. Further slippage toward $1,750 could be on the cards as the market is lacking momentum, but a low interest rate environment was expected to protect prices at the lower levels. "The ultra-loose monetary policy pursued by central banks is likely to preclude any sharper fall in prices," Commzerbank said in a note to clients. PHYSICAL BUYING SLOWS In India, a softening rupee has pushed up local gold prices and is dragging on buying interest from elsewhere in the country. Meanwhile, net gold flows from Hong Kong to China in August dropped 26 per cent from a year earlier, as high gold prices and a slowdown in economic growth weighed on appetite, official Hong Kong trade data showed. "Although the Chinese do love gold, they are not overly keen on paying up for it," said David Govett, head of Precious Metals at Marex Spectron. "China and India, as the world's largest gold consumers, are a big reason as to why gold has stayed high over the last year. But push the price too high and we then have to rely on speculative interest to sustain it, which is never a great way to keep a rally going." Holdings of gold-backed exchange-traded funds also fell for the first time in two weeks on Thursday, but were still close to a record high of 75.03 million ounces. Among other metals, platinum was slightly lower in the absence of fresh news from South Africa, where industrial unrest has shuttered the operations of major platinum miners including Anglo American Platinum, the world's largest producer of the metal. Spot platinum was 0.3 per cent lower at $1,668.74 per ounce. Wildcat strikes broke out in South Africa's platinum belt in August and quickly spread across other sectors of Africa's largest economy. Around 100,000 workers remain on strike, including 75,000 in the mining industry. Palladium fell 0.9 per cent to $645.50 per ounce. Spot silver was moderately lower at $33.88, heading for a weekly loss of 1.7 per cent.

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