PRECIOUS-Gold retreats on optimism over U.S. plans to restart economy

(Adds comments, details and updates prices) * Gold on track for second straight weekly rise * China's economy shrinks for first time since 1992 in Q1 * Dip below $1,700/oz to trigger further falls in gold- analyst * Interactive graphic tracking the global spread: open https://tmsnrt.rs/3aIRuz7 in an external browser By Shreyansi Singh April 17 (Reuters) - Gold prices fell more than 1% on Friday as risk appetite improved over initial plans to reopen the U.S. economy and early signs of success in a COVID-19 treatment drug trial.

Spot gold eased 0.9% to $1,701.99 per ounce by 0706 GMT, having fallen as much as 1.9% earlier in the day. However, the metal was up about 0.5% for the week so far, on track for its second straight weekly rise due to heightened worries over the worst recession in decades. U.S. gold futures slipped 0.7% $1,718.80 per ounce. While there is a "temporal mismatch" between the financial markets and the real economy, the reopening of the U.S. economy is suggesting a recovery may come a lot quicker than expected, in turn weighing on gold, said Stephen Innes, chief market strategist at financial services firm AxiCorp.

U.S. President Donald Trump proposed guidelines on Thursday aimed at reviving the U.S. economy from its coronavirus shutdown. Gold prices fell as the dollar, also considered a safe haven, also slipped after an encouraging report related to the U.S. experimental COVID-19 treatment drug. That report was also spurring profit booking in the gold market ahead of the weekend, said Ajay Kedia, director at Kedia Commodities in Mumbai. Investors also took stock of data from China, which showed the country's economy shrank for the first time since at least 1992 in the first quarter due to the outbreak, although industrial output fell a less steeper-than-expected 1.1% in March, from a year earlier.

"The China data has already been discounted in the market," Kedia added. Asian stocks gained on Friday as President Trump's plans to gradually re-open the U.S. economy offset negative data from China. However, massive stimulus measures from global central banks to weather the economic toll from the coronavirus limited gold's downside, as it is often seen as a hedge against inflation and currency debasement. The U.S. Federal Reserve's balance sheet increased to a record $6.42 trillion this week as it unveiled measures to keep markets functioning amid an abrupt economic free-fall.

The global pandemic, which has infected 2.07 million globally and killed 138,482, according to a Reuters tally as of Tuesday, continued to fuel strong demand for physical gold, analysts said. Palladium gained 2.1% to $2,199.18 an ounce, while silver slipped 2.6% to $15.21 per ounce and platinum fell 0.9% to $776.21 per ounce. (Reporting by Shreyansi Singh in Bengaluru; Editing by Arun Koyyur and Emelia Sithole-Matarise)