Gold firmed in narrow ranges on Friday, struggling to recapture the key $800 mark and taking refuge from sharp swings in oil and currency markets.
Spot gold rose marginally to $796.10/796.80 per ounce by 1130 GMT compared with $795.00/795.80 in New York on Thursday.
Prices have fallen almost 5 percent this week since hitting a two-week high of $836.70 on Monday, reflecting heightened volatility as prices were pulled between volatile oil and a strengthening dollar.
One month implied gold volatility has roughly doubled since August to more than 20 percent. The market has stalled twice so far in attempting to reach 28-year highs scored earlier this month at $845.40.
The dollar is stronger broadly and oil prices have fallen, that would suggest that gold prices could decline towards $750 near term. The positioning on the futures market is still pretty extreme, UBS metals analyst Robin Bhar said.
Today we could also get some window dressing as it's month-end and year-end for some of the banks, pushing prices one way or the other to flatter performance, he added.
Oil tumbled to a one-month low on Friday below $90 a barrel , dulling gold's allure as a hedge against oil-led inflation.
The dollar was up against the yen while the euro rose 0.25 percent on the day versus the dollar after sharp falls earlier this week had made gold less attractive for non-U.S. investors.
However, interest was emerging from speculators and jewelers at lower levels.
There will be buying interest at the lower end. But if we stay below $800, we'll have the chance to visit the last low around $793, said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.
The easing of gold prices from near 28-year highs is tempting Indian gold buyers back to jewelry shops during the ongoing marriage season, after they kept their moneybags zipped during the peak Hindu festival period.
In other bullion markets, the COMEX February contract was trading down 40 cents an ounce at $801.90. The benchmark October 2008 contract on the Tokyo Commodity Exchange closed 29 yen per gram lower at 2,850 yen.
Federal Reserve Chairman Ben Bernanke said on Thursday a resurgence in financial strains in recent weeks had dimmed the outlook for the U.S. economy, signaling an openness to again lowering interest rates.
The Fed is seen trimming benchmark U.S. interest rates by a quarter percentage point to 4.25 percent next month after it cut them by a cumulative three-quarters of a percentage point since September to cushion the economy from a severe housing slump and credit market turbulence.
Any further cut in U.S. borrowing costs could be beneficial for gold as it dents the dollar's yield potential, drawing investors towards alternative assets.
In other precious metals, platinum fell to $1,439/1,444 an ounce from $1,443/1,447 in New York on Thursday, but supply worries were seen as supportive with an expected strike over safety in top producer South Africa on December 4.
Investment bank UBS revised up its platinum price forecast for 2008, to an average $1,450 per ounce from its previous view of $1,363.
Palladium was steady at $345/349, while silver was narrowly traded at $14.21/14.26 an ounce from $14.23/14.28 late in New York on Thursday.
(Additional reporting by Lewa Pardomuan in Signapore)
(Editing by Michael Roddy)