Bullion posts second straight weekly loss

New York/London: Gold fell on Friday, following losses in the euro and US equities, as uncertainty over negotiations for a bailout package for Greece prompted investors to sell the metal and hoard cash.

Bullion posted a second straight weekly loss, as a lack of concrete steps to avert a ruinous Greek default more than offset a rally earlier last week fuelled by the US Federal Reserve's long-term outlook for near-zero interest rates.

Technical support lifted gold off a two-week low hit during he session, but scenes from a workers' strike in Greece and the government's failure so far to reach a decision on accepting the bailout pressured financial markets across the board.

"In a situation where the financial system may be at risk, people may need a lot of cash to buffer themselves against a potential shock such as a Greek default," said Bart Melek, head of commodity strategy at TD Securities.

"They may swap out gold along with other assets for cash," Melek said.

Spot gold fell 0.9 per cent to $1,715.99 an ounce, having hit a low of $1,703.69.

US gold futures for April delivery settled down $15.90 an ounce at $1,725.30. Trading volume was largely in line with its 30-day average and the highest last week.

Limited losses

Gold's losses were limited as liquidity improved a day after the biggest operator of US futures exchanges, CME Group, lowered trading margins for a range of commodities contracts including gold, silver and platinum.

Risk aversion drove down equity markets and industrial commodities such as crude oil and copper, as investors favoured safe-haven US Treasuries, sending the dollar higher against the euro.

"Today, the market is in risk-off mood again with stock markets weaker as well," said Alex Zumpfe, a trader at Heraeus precious metals house. "Gold is facing some selling pressure after support levels didn't trigger sufficient buying interest.

Gold looks vulnerable to a correction after rising nearly 10 per cent so far this year, particularly on possible negative headlines related to the Eurozone debt crisis, analysts said.

• 0.9%: drop in price of spot gold on Friday
• $15.90: fall in US gold futures for April delivery
• 10%: rise in gold pricesthis year