Gold Price Struggles After Spain Downgrade

(Reuters) - Gold struggled to make headway Friday as the euro came under pressure after Standard & Poor's downgraded Spain's credit rating, while investors waited for a monetary policy decision by the Bank of Japan later in the day for further trading cues.

Spot gold was little changed at $1,656.65 an ounce by 0036 GMT, on course for a 0.9-percent weekly gain. It hit a two-week high of $1,660.60 in the previous session.

U.S. gold edged down 0.2 percent to $1,657.40.

Standard & Poor's on Thursday cut its credit rating on Spain to BBB+ from A, a two-notch downgrade, citing its expectation the government's budget deficit will deteriorate even more than previously thought due to economic contraction.

The Bank of Japan is likely to ease monetary policy on Friday by boosting asset purchases by up to 10 trillion yen, said sources familiar with the central bank's thinking.

Euro zone economic sentiment fell more than expected in April, wiping out gains made in the first two months of 2012 and signaling that economic recovery in the second half of the year may be more muted than forecast, data showed on Thursday.

Upbeat U.S. home sales data partly offset the gloomy sentiment in Europe. Contracts to purchase previously owned U.S. homes increased solidly to a near two-year high in March, suggesting the spring selling season got off to a firmer start and offering hopes of a pickup in housing.

But the number of Americans claiming jobless benefits fell slightly last week but remained above levels posted earlier this year, suggesting stalling improvement in the labor market.

The euro suffered a drubbing early in Asia on Friday after Standard & Poor's hit Spain with a two-notch credit rating downgrade, while the yen could go either way depending on the scale of easing delivered by the Bank of Japan later.