By Sumita Layek
March 13 (Reuters) - Gold gained 1% on Friday but was still set for its worst week in more than three years after this week's wider market sell-off forced investors to sell bullion to cover margin calls.
Palladium prices rose by more than 11% during the trading session, after losing nearly 28% in the previous session, but they were still on track to record their biggest-ever weekly fall amid the wider market turmoil.
Spot gold, which dropped by as much as 4.5% on Thursday, was up 0.9% to $1,590.96 per ounce by 1224 GMT on Friday. For the week, it was down 5.2%, the biggest such fall since November 2016. U.S. gold futures were down 0.3% to $1,585.70.
"We had some liquidation in gold ... some might be surprised that gold was down and say it's not a safe haven asset any more, but in this context, it helps generating liquidity at any time you need it," said UBS commodities analyst Giovanni Staunovo.
"Some are using the opportunity to buy (gold) at a lower level (now). Also, there's some stabilization in the market and that's helping as well."
In a move to stem a market meltdown, the Federal Reserve on Thursday offered $1.5 trillion in short-term loans, signaling more aggressive action to stimulate the economy.
European stocks bounced back from their worst day ever, as signs of a U.S. stimulus package helped to soothe fears about an economic shock from the contagion.
"We expect prices to remain supported by risk-off sentiment in the coming months as uncertainty surrounding global growth persists with the COVID-19 pandemic now spreading throughout the world," Fitch Solutions said in a note.
An oil price war will also support gold, Fitch added.
Palladium was up 5.7% to $1,936.03 per ounce, but was headed for a weekly decline of more than 24%.
"It's a small market, very illiquid and has low trading volumes. If someone wants to sell, we get these ugly moves," UBS's Staunovo said.
"We should see it staying in deficit. But, if it's a risk off environment and considering the weak market size of palladium, we will see these large shifts. But again, lower prices might offer (buying) opportunities."
Platinum gained 4.3% to $795.96, but was down 11.5% for the week, its steepest dip since 2010.
Silver fell 0.6% to $15.72.
(Reporting by Sumita Layek in Bengaluru; editing by Barbara Lewis and Alexander Smith)