Gold prices were likely to find support at USD1,700.50 a troy ounce, the low of November 30 and resistance at USD1,766.95, the high of November 17.
Gold futures initially rallied along with other risk-sensitive assets, climbing to a two-week high of USD1767.05, after official data showed that the U.S. unemployment rate dropped unexpectedly to a two-and-a-half year low of 8.6% in November, as the U.S. economy created 120,000 new jobs.
However, gold prices pared gains amid lingering concerns over whether the euro zone's bailout fund, the European Financial Stability Facility, can contain the region's debt crisis. Speculation over a potential downgrade of Spain also weighed.
For much of the last year, investors' typical reaction to downbeat news from Europe was to buy gold, as it boosts the safe haven appeal of the precious metal, but that relationship has unraveled recently.
In recent sessions, gold has tended to move in line with stocks and other commodities, losing some of its appeal as a safe haven asset as investors prefer to turn to the relative safety of the U.S. dollar.
Meanwhile, prices remained supported amid further evidence of central bank demand for gold. South Korea's central bank said on Friday that it purchased 15 metric tons of gold in November to bring its total holdings of the metal to 54.4 tons, which is equivalent to 0.7% of its total foreign-exchange reserves.
German lender Commerzbank said in a report that, 'Even after this purchase, gold accounts for less than 1% of the country's currency reserves, meaning that further purchases are likely to follow.'
'The sustained interest in purchasing gold displayed by central banks is continuing to lend support to its price,' the report added.
Futures rallied nearly 2% on Wednesday after six major central banks, including the Federal Reserve and the European Central Bank announced a coordinated action to enhance the capacity to provide liquidity to the global financial system.
The surprise announcement came after China said that it plans to cut bank's reserve requirement ratios in an effort to help boost liquidity and support the world's second largest economy amid global market turmoil.
Gold can benefit from such an environment of easy money because of expectations that ample liquidity would put a damper on the value of paper currencies.
Elsewhere on the Comex, silver for March delivery settled at USD32.61 a troy ounce by close of trade on Friday, climbing 3.83% on the week, while copper for March delivery settled at USD3.586 a pound, surging 7.4% over the week.
Global financial service provider HSBC Holdings on Friday raised its average silver price forecast for 2012 to USD34 an ounce, up from a previous forecast of USD32 an ounce, on expectations demand for the metal as an investment will rise.
In the week ahead, investors will be closely watching the ECB's policy meeting on Thursday, amid expectations for a 0.5% rate cut by the bank. Meanwhile, European Union leaders are to hold a summit meeting to address the region's crisis on Friday.
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