Gold climbed to three-month highs on Friday and looked set to post its biggest weekly gain in six months as a series of weak U.S. data throughout the week raised fears about economic growth, hurting the dollar.
Spot gold was up 1 percent at $1,316 an ounce after rising to its highest since Nov. 7 at $1,320.90. It was up around 4 percent for the week, the largest such gain since mid-August.
U.S. gold futures for April delivery also hit a three-month high of $1,321.50 an ounce, up for an eighth straight session in the longest winning streak since July 2011. They were last up 1.4 percent at $1,318 an ounce.
"Gold continues to trade extremely well and it is basically taking out one key resistance level after the other," BofA Merrill Lynch analyst Michael Widmer said.
"Fundamentally, in terms of having a sustained theme that should take gold higher, be it on the inflation side, on the monetary side, or currency side I still don't see one, but for now it's hard to argue against it."
The technical picture has improved over the past few sessions and a move above its 200-day moving average, last seen in August 2012, looked bullish, Standard Bank said.
The dollar fell 0.2 percent versus a basket of currencies, having hit its lowest since Jan. 2 earlier, as data showed U.S. manufacturing output and factory production fell in January and recorded their biggest drop since 2009.
Gold has gained nearly 9 percent since the beginning of the year, after a 28 percent drop in 2013 on doubts over the U.S. economic recovery and as emerging-market turmoil weighed on some equity markets.
- Now that gold touched $1,300, here’s what’s next
- Wall Street little changed after economic data
- This will drop gold to $1,000: Credit Suisse pro
- Dennis Gartman: ‘I was wrong’
- Bitcoin drops another 20% as Mt Gox highlights bug
Analysts remain cautious over the medium-term outlook for gold, however. Many expect the U.S. economy to recover and the dollar to rally, making the investment case for gold, usually seen as a safe haven in times of trouble, still unattractive.
"As positive as we remain on the American currency and the U.S. economy in 2014 (especially once macro estimates rebound as the weather effect passes), there is little point fighting the short-term uptrend," VTB Capital said in a note.
©2014 CNBC LLC. All Rights Reserved.