Gold rallied 1 percent on Friday in volatile trade, as the safe-haven bid for precious metals returned when a survey showed U.S. consumers gloomy about the economic outlook.
For the week, gold fell around 2.5 percent, its second straight weekly decline and its biggest weekly loss since early May. Traders cited panic liquidation by hedge funds for the weekly losses, but said that factor was missing on Friday.
The lack of fund selling that started last week allowed gold to move higher on Friday, said Miguel Perez-Santalla, vice president of sales of Heraeus Precious Metals Management.
Bullion slipped to three-week lows in early trade before Asian bargain-hunting boosted prices. Gains accelerated after U.S. data showed American consumers gloomier about the economic outlook than they have been since May 1980.
Spot gold was up 0.9 percent at $1,804.70 an ounce by 2:59 p.m. EDT (1859 GMT), after hitting $1,761.94, its lowest level since August 26.
U.S. gold futures for December delivery rose $33.30 to settle at $1,814.70 an ounce. Trading volume was in line with the average for this week.
Silver rose 1.3 percent to $40.33 an ounce.
EYES ON FED NEXT WEEK
Federal Reserve policy makers meet next week, and some investors expect them to announce a program to stimulate the economy by buying longer-dated U.S. government debt while selling short paper. Many investors have already nicknamed the potential program Operation Twist.
Gold investors expect such a move by the Fed to pressure the dollar, which could boost the value of precious metals. But few were willing to bet that gold will rise much higher in the short term.
A portion of the price of gold has already priced in more currency devaluation, said Hereaus' Perez-Santalla.
The Fed's quantitative easing program helped boost gold, which is up 40 percent since the start of the central bank's $600 billion bond-buying spree that ended in June.
Most analysts said gold's long-term bull run remains intact, but some investors questioned the metal's ability to rise above $2,000 after its most volatile trade in two years.
Implied volatility in gold eased after surging on Monday to its highest level in more than two years, suggesting investors were no longer betting on a big break-out in prices.
Next week's volume could be thinner than usual as around 500 traders, institutional investors and physical users will attend the annual industry get-together hosted by the London Bullion Marketing Association in Montreal.
Among platinum group metals, platinum hit $1,762.28 an ounce, its lowest since August 11, as the crisis reinforced worries about the health of global economic growth and demand for autocatalysts.
Platinum was up 1.3 percent at $1,804.49 an ounce, and palladium gained 1 percent at $727.73 an ounce.