Gold eased on Friday as a softer tone to the euro and stock markets indicated caution among investors, but remained set for its first weekly gain in four as they weighed up the likelihood of fresh measures to stimulate the U.S. economy. The gold market has become dominated by short-term investors who buy and sell on relatively small price moves, analysts said, keeping the metal within a $32 range this week, its narrowest weekly spread in more than three months. Spot gold [XAU= 1577.78 -3.51 (-0.22%) ] was down 0.3 percent at $1,577 an ounce on Friday morning, while U.S. gold futures [GCCV1 1576.20 -4.20 (-0.27%) ] for August delivery were down $4.90 an ounce at $1,576. "Physical investor demand, when you look at ETFs, is not positive, so you would need speculative demand to be making up the difference, and it's not. That's related to the issue of growing skepticism over whether there will be U.S. QE ." With physical demand from major consumer India and interest in gold-backed exchange-traded funds soft, the precious metal is struggling to build on gains, analysts said. "Given the collapse of the rupee, gold prices in India are still close to record highs, which is killing the jewelry market at the moment," Citigroup analyst David Wilson said. Gold quickly retreated from the week's highs after Federal Reserve chief Ben Bernanke gave no hint of further quantitative easing to boost growth in a speech to Congress on Tuesday. Bernanke offered a gloomy view of the economy's prospects, but provided few concrete clues on whether the Fed was moving closer to a new round of monetary stimulus. Such a move would have been gold-friendly, keeping interest rates and hence the opportunity cost of holding bullion at rock bottom, while pressuring the dollar. Speculation an announcement on QE may arrive later this year is still underpinning gold. The wider markets offered little support to the metal, with stock markets falling and the euro [EUR=X 1.2158 -0.0121 (-0.99%) ] falling against the U.S. dollar as investors fretted about Spain's fiscal woes and favored higher yielding currencies. ETF Holdings Drop The world's largest gold-backed ETF, New York's SPDR Gold Trust [GLD 153.07 -0.31 (-0.2%) ] reported a nine-ton drop in its holdings on Thursday, its biggest one-day outflow since May 22. The decline brings its total gold holdings to a six-month low. Gold demand in major consumer India remained weak, meanwhile, as the rupee ceded more ground to the dollar [.DXY 83.48 0.60 (+0.72%) ], boosting local gold prices. Gold imports into India have already witnessed a more than 50 percent drop this year, and are likely to continue to fall in coming quarters. "The monsoon, which typically starts in the southern tip of India has been slow to move northwards, raising concerns of inadequate rainfall for farmers," HSBC said in a note. "Rural India accounts for close to two-thirds of gold (jewelry) purchases and a good harvest for farmers typically leads to higher amounts of gold jewelry bought," it added. "As the pace of the monsoon has been relatively slow, Indian merchants have expressed concerns of a potential drought in India, which may lead to a decline in gold (jewelry) demand." Among other precious metals, silver [XAG= 27.06 -0.11 (-0.4%) ] was down nearly 1 percent at $27 an ounce, while spot platinum [PLCV1 1409.00 -14.10 (-0.99%) ] was down 1 percent at $1,410 an ounce and spot palladium [PACV1 576.70 -8.15 (-1.39%) ] was down 1.41 percent at $577 an ounce. Miner Anglo American [AAL-LN 2044.50 9.50 (+0.47%) ], the parent company of number one platinum miner Anglo American Platinum [AGPPF 56.50 --- UNCH ], said its platinum operations saw virtually flat production compared with the previous year, due to improved productivity and safety performance at its core Rustenburg mines. The result came a day after a major reshuffle at its South African units that included a new boss for its platinum unit after the departure of chief executive Neville Nicolau.

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