Is the big picture still positive for gold?
'Gold rose on Friday, on track to post its biggest weekly gain in more than a month, with caution prevailing ahead of a G20 meeting whose agenda will be dominated by the euro zone debt crisis and steps to tackle contagion.
Spot gold rose 0.4 percent to $1,671.99 an ounce at 1139 GMT, from $1,666.20 late in New York on Thursday.
Reflecting growing concern about the region's debt crisis, ratings agency Standard and Poor's downgraded the long-term credit rating of Spain by one notch, just as policymakers get ready to pressure Europe to act swiftly to tackle its financial woes at a weekend meeting.
Although investors are not expecting any concrete resolutions to the debt crisis, they hope it will provide an opportunity for officials to agree on the outlines of a plan in time for a European Union summit on October 23.
'The big picture remains positive for gold. The supply-demand fundamentals are very much in place and there has been an augmentation in that rally by economic fears,' said Ross Norman of Sharps Pixley.
'Presently gold sits toward the top end of its trading range . . . and awaits fresh impetus - physical demand is robust and there is good support below this market.'
Also helping boost gold was a fall in the dollar, which dipped against a basket of currencies. A weak dollar makes commodities priced in the U.S. unit cheaper for holders of other currencies.
Gold prices are up 2.3 percent so far this week, on track to post its strongest weekly gain since early September.
U.S. gold gained 0.4 percent to $1,674.80 an ounce, while spot silver rose 0.2 percent to $31.85 an ounce.
UBS reduced its 2011 average gold price to $1,615 from $1,665 to allow for mark-to-market adjustments and the impact of a stronger dollar, but kept its 2012 forecast at $2,075.
'Our core view is that ongoing global macroeconomic disappointments, the inevitability of further negative turns in the European sovereign debt crisis, and low business, consumer and investor confidence will lead to gold being increasingly used as the line of defense against negative market outcomes,' the bank said in a research note.
The most serious risk to gold is a rapid deterioration in bank funding and escalating liquidity concerns, it added.''