By Sethuraman N R
(Reuters) - Gold edged higher on Friday as weak economic data from the euro zone exacerbated fears of a global slowdown, weighing on risk sentiment and putting bullion on track for its best week in nearly two months.
Spot gold was up about 0.4 percent at $1,314.56 per ounce by 10 a.m. EDT (1410 GMT), while U.S. gold futures gained 0.5 percent to $1,314.30.
"There is some safe demand that has surfaced," said Jim Wyckoff, senior analyst at Kitco Metals.
"The U.S. Federal Reserve suggested U.S. economic growth was slowing, which has spilled over into notions that the rest of the world economy might be experiencing slower growth. That was highlighted by the PMI data out of the European Union, auguring for some trepidation in the world's stock markets."
Businesses across the euro zone performed much worse than expected this month as factory activity contracted at the fastest pace in nearly six years, hurt by a big drop in demand, a survey showed.
European stocks suffered after the weak data, while U.S. stocks opened lower.
"Price action in gold continues to lend strength to our view that expected data deterioration will help spark a gold rally as interest rates continue to fall in the context of a slowing global economy," analysts at TD Securities wrote in a note.
Earlier this week, the Fed brought its three-year drive to tighten monetary policy to an abrupt end, abandoning projections for any interest rate hikes this year.
Lower interest rates reduce the opportunity cost of holding non-yielding gold and weigh on the dollar.
Gold prices rose to their highest since Feb. 28 on Thursday at $1,320.22. Despite paring some of those gains, they were still on track for a third straight weekly gain, up about 1 percent so far.
"Gold could not break above $1,320 on the upside and saw a correction. The current trading range seems to be between $1,305-$1,320," said Afshin Nabavi, senior vice president at MKS SA.
"With the geopolitical and the (uncertain) Brexit situation, we may still be heading higher."
Among other precious metals, spot palladium fell 2.6 percent to $1,565 per ounce, after touching an all-time high of $1,620.53 in the previous session. Silver was down 0.4 percent at $15.41 per ounce, while platinum fell 0.8 percent to $851.46. Platinum has risen nearly 3 percent so far this week.
(Reproting by Additional reporting by Sumita Layek in Bengaluru; editing by Jonathan Oatis)