Gold prices fell on Friday, extending the previous session's retreat from record highs as fresh strength in equity markets and gains in the euro versus the safe-haven Swiss franc pointed to sharper appetite for risk.
Spot gold was down 1.7 percent at $1,735.64 an ounce at 1340 GMT. It is still on track for its best weekly performance since November 2009, however, and has risen 22 percent so far this year on a potent mix of concerns over U.S. and euro zone debt levels and economic growth.
The precious metal hit a record $1,813.79 an ounce early on Thursday. Investors remain jittery over the outlook for the U.S. economy, which could eventually spark a fresh rally in gold, analysts said.
"Near term, a correction makes sense in relation to other safe havens," said Macquarie analyst Hayden Atkins. "Gold has traded in lockstep with U.S. government debt in particular. As Treasuries have risen, gold has basically gone the same way."
"The question is, if people are more concerned about the sovereign risks around the United States, added into the problems elsewhere, will that relationship break down?
"That is what you would need for the gold price to go higher -- for people to be reflecting their concerns more in gold than in safe havens in general."
Gold hit a session low of $1,734.90 an ounce after Wall Street stocks rose at the open after data showed U.S. retail sales posted their biggest gain since March last month.
A rebound in stock markets in recent days has diverted some investment from gold.
The world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust , reported its biggest one-day outflow since Jan. 25 on Thursday, with its holdings declining by 23.6 tonnes, worth some $1.3 billion at current prices.
"Some ETF investors clearly view the recent gold's sharp price rally as exaggerated and have taken profits as financial markets calm," said Commerzbank in a note.
OUT IN FORCE
But overall risk-averse buyers have been out in force this week, putting gold on track for its biggest one-week rise in nearly two years, up 4.4 percent.
In the week ended Aug. 10, two of the largest gold ETFs, SPDR and the iShares Gold Trust , had their fourth-biggest week of net inflows, data from Lipper showed on Thursday.
On the physical market, robust investment demand in Asia helped gold premiums in Hong Kong and Singapore remain steady.
"The gold market remains underpinned by the movement to physical gold, which has persisted all week," said UBS in a note. "European demand for small bars particularly, but also coins, remains very strong. As the week has progressed Asian physical demand, outside India, has been noticeably higher.
"We have also observed among existing and indeed new clients this week a growing preference towards allocated gold instead of metal account/unallocated gold. This is quite obvious among our wealth management and private clients, but even among the fund industry, interest in allocated gold is growing again.
"The move to real assets such as gold in physical form signifies the heightened state of risk aversion at present."
While investment remains high, relatively little gold scrap is being returned to the market, with much readily available metal already having been sold.
Among other precious metals, silver was down 0.5 percent at $38.51 an ounce.
The gold:silver ratio, or the number of ounces of silver needed to buy an ounce of gold, held near 46 on Friday, close to its highest since early February, as silver underperformed gold.
Meanwhile, spot platinum was up 0.7 percent at $1,795.20 an ounce, while spot palladium was up 0.7 percent at $743 an ounce.
Platinum prices edged back above those of gold after the two metals reached parity for the first time since late 2008 early this week, but gold may still regain its premium over platinum if risk aversion rises once more, lifting gold as a safe-haven and weighing on platinum as an industrial metal.