Gold slid on Friday, closing its worst week since June, as profit-taking by investors and a spike in the U.S. dollar outweighed the desire for a safer haven.
Gold tumbled in early U.S. hours on apparent investor liquidation, but clawed back much of its loss by mid-afternoon as the resignation of European Central Bank policymaker Juergen Stark reignited aversion to riskier assets.
But even as U.S. stocks fell nearly 3 percent and other commodities tumbled, gold came under renewed pressure as two weeks of extreme volatility for bullion rattled some confidence in its bull run -- despite the prospect of a second recession.
The weakness in stocks and the drop in bond yields to new lows have helped gold come back today, but I doubt people are building new long positions ahead of the weekend, said James Steel, metals analyst at HSBC in New York.
Everyone's cautious after this wild week.
By 4:30 p.m. EDT (2030 GMT), spot gold was down half a percent at around $1,858 an ounce, off an earlier low under $1,825. For the week, however, the spot price, which tracks trades in bullion, was down 1.4 percent -- its sharpest loss since the week ending June 26.
U.S. gold futures for December delivery settled up 0.1 percent at $1,859.50, after touching an intraday low at $1,825.50.
The spot and futures prices hit record highs above $1,920 an ounce on Tuesday, before logging daily swings of up to $87.
Wall Street stocks, oil and copper fell about 3 percent. U.S. Treasuries joined gold in moving up, amid demand for so-called safe havens.
Worries that the U.S. Congress was unlikely to approve much of President Barack Obama's $447 billion plan to get jobless Americans working again added to investor angst.
Gold's working into a quiet Friday close after being pushed around again from lows to highs, said George Nickas, a futures broker at FC Stone in New York.
The strong dollar was suspected to be another factor restraining gold from breaking out into a new rally. The U.S. currency was up 1.2 percent against a basket of currencies after the euro fell around 1.6 percent.
Some expect gold prices to turn volatile again after a weekend meeting of Group of Seven finance ministers, at which officials of industrialized countries are expected to come under heavy pressure to revive economic growth.
France has called for a coordinated response from the G7 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.
Some traders said gold also came under pressure from platinum, which looked increasingly attractive to some investors after the white metal's prices fell below gold's this week.
Historically gold is about half the price of platinum, said Lars Steffenson, managing director at Ebullio Capital Management. In the last two, three weeks you've actually seen gold spike to levels where it shouldn't be.
That obviously has to do with the sheer volume coming into gold, but a lot of the (funds) are looking long-term and saying this doesn't make sense. There is an awful lot of gold and platinum is quite tight.
Spot platinum was down 1.2 percent at around $1,832 an ounce.
Prices at 2:19 p.m. EDT (1819 GMT).
(Editing by Dale Hudson)