Gold fell on Friday, heading for its biggest weekly drop in two months, but prices remain near a 11-month high as markets seek clarity on when and whether Spain will ask for a bailout. Standard & Poor’s cut Spain’s credit rating to one rank above junk on Wednesday, while Spain’s economy minister on Friday said there was no political defiance for the euro zone’s bailout request.
Gold as an inflation hedge had moved into the area as investors reacted to positive U.S. data showed producer inflation rate accelerated more than forecast in September. But then corrected and toward a weekly drop of 0.8%, the biggest weekly decline since August 5. “Gold needs support, which may in the short term is at $ 1.750, but I think there is no reason for gold to go down to the bottom level,” said James Steel of HSBC.