SINGAPORE: Gold was hovering near a one-month peak on Friday and looked set to end higher for a second straight week on hopes that weak US data would deter the Federal Reserve from starting to scale back its economic stimulus measures this year. The number of Americans filing new claims for unemployment benefits fell less than expected last week, while US manufacturing grew at its slowest pace in a year in early October, data showed on Thursday. Spot gold had eased 0.3 per cent to $1,342.21 an ounce by 0630 GMT but was still not too far from the $1,351.61 hit on Thursday, the highest since September 20. The metal has gained about 2 per cent this week. "Weak employment data signals a positive effect for gold as markets adjust their expectations regarding a tapering (of the US stimulus)," said Chen Min, a precious metals analyst at Jinrui Futures in Shenzhen. "However, it is still too early to reach the conclusion that the US recovery is stagnant," Chen said, adding the flow of data had been disrupted by a partial government shutdown earlier this month caused by political wrangling over the budget. Chen and some other analysts believe gold prices do not have much room to rise as investor sentiment has been dampened by volatile price movements this year, outflows from exchange-traded funds and a global economic recovery. After 12 years of gains, gold has fallen nearly 20 per cent this year on fears the Fed would begin cutting back its easy-money policy by trimming its $85 billion monthly bond purchases, which have fuelled gold's appeal as a hedge against inflation. But the metal has rallied 8 per cent, or nearly $100 an ounce, in less than two weeks as weak US economic data and lingering budget uncertainties in Washington increased gold's safe-haven appeal. "The recent trend in gold and its volatile reaction to the most recent economic release show the market is still heavily data-dependent for price direction," HSBC analysts wrote in a note. "While we are bullish on gold longer term, further gains may be difficult to achieve in the near term." Physical demand The gain in spot prices has done nothing to revive soft physical demand in most of Asia and elsewhere. Premiums on the Shanghai Gold Exchange fell to multi-month lows of $2 an ounce on Friday. That compares to highs of $30 seen in April-May. However, in India premiums were at a record high of $120 an ounce as dealers struggled to meet festive demand amid tight supplies.

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