Gold Price Tug-o-War: Buying in the East vs. Selling in the West

Gold prices gained steadily if modestly Friday as demand from India and bargain hunting offset a resumption of investor flight to dollar liquidity.

European stocks were down sharply, nearly 2 percent in France and nearly 3 percent in Germany after the continent's biggest economy reported a bigger-than-expected retail sales decline last month. The euro declined and U.S. stocks futures were pointing to a lower open, as well.

Consumer sentiment is coming down rapidly, Heino Ruland, an economist at Ruland Research GmbH in Eppstein, Germany, wrote in a report. Recent public talk about a looming recession in the euro area and the U.S. has lifted unemployment expectations considerably. Fears over the state of the global economy are beginning to take its toll.

As the euro fell the dollar rose, gaining 0.4 percent against a basket of major currencies as investors looked for both safety and liquidity. Some of the dollar's gains came at the expense of gold as investors sold positions to boost liquidity.

Nevertheless, gold -- which has been competing against the dollar -- inched higher in global markets, lifted by strong seasonal demand for physical gold from India and investors seeking a discounted entry point in the precious metal.

It was up 1 percent in European trading. In New York electronic trading, gold gained nearly half a percent.

Analysts and investors also maintained a positive outlook for gold.

The macro backdrop remains unchanged from gold's perspective, and is still gold fertile, Barclay Capital wrote in a note.

Gold for December delivery was up $3.30 to $1,620.60 while gold for immediate delivery was up $3.85 to $1,620.84.

Silver for December delivery was off 15 cents to $30.37, while silver for immediate delivery was off 16 cents to $30.36.