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Gold prices pared losses in choppy trade on Friday but were still on track for their biggest weekly loss since June as some investors cashed in gains after losing confidence in the metal's ability to build on this week's record highs.
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Prices fell sharply earlier in the session, dropping $20 an ounce in a single minute. Traders blamed heavy fund liquidation on the New York futures market, where trading volumes jumped by 3,000 lots shortly after 0600 EST.
Gold found little support as it slid below $1,830 an ounce as concerns grew its run-up to record highs may have been overdone. Talk of further central banks sales after Libya said on Thursday it had sold 29 tonnes of gold and the prospect of more margin hikes on Comex futures also unsettled traders.
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Spot gold was down 0.6 percent at $1,857.80 an ounce at 1339 GMT, having earlier risen as high as $1,885.50. It was well off its session low of $1,824.44 an ounce, however.
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The metal has had a volatile week, trading in a near-$130 range after a swift correction followed Tuesday's record $1,920.30 an ounce.
"People are probably very exposed to gold now, because they've been so bullish, yet the technicals aren't that great now that you've had that double-top pattern coming through," said Macquarie analyst Hayden Atkins.
"There is no real direction provided by other markets," he added. "I guess this is a sign that people are interested in taking profits at these kinds of prices, in the absence of direction from anywhere else."
Trade is expected to remain volatile ahead of a G7 finance ministers' meeting this weekend at which officials will come under heavy pressure to take action to revive economic growth.
France has called for a coordinated response from the Group of Seven nations after anxiety over Europe's debt crisis led world stock markets to drop in recent weeks, though differences between the economic problems facing the United States, Britain and euro zone states are complicating the task.
Other markets provided little direction to gold. U.S. stocks dipped at the open, European shares fell as traders were unimpressed by a $447 billion jobs package unveiled by U.S. President Barack Obama on Thursday, and the dollar rose.
U.S. gold futures for December delivery ticked up $3.90 an ounce at $1,861.40.
SCRAP RETURNS TO THE MARKET
There were some signs that high prices were attracting recycled metal back to the market. Japan's largest bullion house, Tanaka Kikinzoku Kogyo, said it recycled a record 1.9 tonnes of gold from jewellery brought in by customers in August alone as prices hit record highs.
