New York: Gold prices fell on Friday, posting a third straight week of declines as strong economic data boosted the dollar and commodity investors remained cautious of a US proposal to limit bank risks.
The euro hit a rough patch last week against the US currency, tumbling to below $1.39 due to fiscal fears in euro zone countries and strong US data.
A stronger dollar cuts into bullion's appeal as a dollar hedge. Gold is down about 2 per cent so far in 2010.
"We certainly think the dollar run could go for at least another two or three months, and that could be a negative for gold going forward," Peter Buchanan, senior economist at CIBC World Markets in Toronto.
Gold has been under additional pressure since US President Barack Obama last week moved to restrict some bank trading operations, including commodities.
Spot gold was at $1,079.05 against $1,086.75 late in New York on Thursday.
US April futures settled down $1 at $1,083.80 an ounce on the Comex division of Nymex.
The US GDP report showed the economy in the fourth quarter grew at its fastest pace in more than six years, surprising economists.
Interest rates
A stronger economy could prompt real interest rates to rise, said Tobias Merath, head of commodity research of Credit Suisse.
This could boost the opportunity cost of holding gold.
"We are now in econ-omic recovery, undoubtedly, and at some point in the recovery real rates will start rising. That could be a trigger for more selling of gold," Merath said.
Year to date, gold prices were about 2 per cent lower from the December 31 close of $1,096.35.
US banks and trading houses have been taking advantage of the price drop to buy call options to profit from possible price increases and rising volatilities, said Comex floor trader Jonathan Jossen.
In Asia, gold bars were offered at the highest premiums in more than a year as demand from China gained pace ahead of the Lunar New Year, dealers said.
