Gold rose in unison with equities and commodities on Friday, notching a weekly gain, after U.S. nonfarm payrolls data showed modest job growth in January.

Bullion prices climbed after the Labor Department also said U.S. job gains in the prior two months were bigger than initially reported, supporting views the economy's sluggish recovery was on track despite a surprise contraction in output in the final three months of 2012.

Other data showing improved U.S. factory activity and better consumer confidence data also sent the Dow above 14,000 for the first time since October 2007, lifting gold and industrial commodities, led by crude oil.

The decent payrolls data and signs of a recovering U.S. economy, however, have dampened gold's investment case as a hedge against further monetary stimulus by the Federal Reserve and its safe-haven appeal, an analyst said.

"As an investor, I really do struggle with gold because along with any other commodities, gold does not have a yield, so the actual investment case of holding it is shaky," said Frances Hudson, global thematic strategist at Standard Life Investments, who helps manage its $247 billion in assets.

Spot gold was up about 0.30 percent above $1,668 an ounce, while U.S. COMEX gold futures for February delivery settled up $8.60 an ounce at $1,670.60. It held above its 200-day moving average at $1,663 an ounce, a key chart level.

The metal briefly turned lower in a knee-jerk sell-off after St. Louis Fed President James Bullard said the U.S. economy is on track for a better performance this year, which will put the central bank in a position to slow or halt its massive bond-buying program.

Gold fell nearly one percent on Thursday as investors disappointed by its failure to rally further on the previous day's soft U.S. growth reading cashed in gains, with a retreat in European stocks and the euro adding to selling pressure.

The metal hit a more than two-week high on Wednesday after data showed the U.S. economy unexpectedly shrank in the fourth quarter, holding those gains after the Federal Reserve pledged to maintain a monthly $85 billion bond-buying program.

Its failure to rise further as a rally in stocks and the euro ran out of steam prompted selling.

Spot gold was down more than one percent near $1,661 an ounce, while U.S. gold futures for December delivery settled down $19.60 to $1,662.

"Once again (there was) not enough follow-through buying and intraday traders took profits," VTB Capital analyst Andrey Kryuchenkov said. "We failed to breach $1,680 while the Federal Open Market Committee offered little new."

"There is still not enough physical buying... and investors remain very cautious," he added.

The euro halted its rally, falling below a 14-month peak against the dollar, while European shares slipped for a second day as weak German retail sales and poor earnings at its biggest bank unnerved investors.

Usually, ultra-loose monetary policies lend support to gold. Previous rounds of Fed asset purchases drove down interest rates and weakened the dollar as well as spurring rallies in stocks and prompting some to turn to gold as an inflation hedge.

Analysts said that the market had already priced in that it would be premature for the U.S. central bank to discuss abandoning the quantitative easing programme and that the reaction to the FOMC statement would be muted.

Gold rose on Wednesday after data showed the U.S. economy unexpectedly contracted in the fourth quarter, and stayed higher as the Federal Reserve left in place its bond-buying stimulus plan.

The metal's inflation-hedge appeal received a boost after the Fed in its January policy statement repeated a pledge to keep buying securities until the outlook for employment "improves substantially.''

The U.S. central bank also said that economic growth had stalled but indicated the pullback was likely temporary.

Gold was also bolstered by hopes that the Fed would keep its monetary policy loose for a long time, after the Commerce Department said gross domestic product fell at a 0.1 percent annual rate, its weakest performance since it emerged from recession in 2009.

"The market had extended gains ahead of the Fed on the unexpected GDP number,'' said Frank McGhee, head precious metals trader at Integrated Brokerage Services LLC.

"Most of what's in the Fed statement has already been baked into the price, and that put a market susceptible for a correction back to the downside,'' McGhee said.

Spot gold was up 0.7 percent at $1,675.61 an ounce, having risen as much as 1.1 percent to a one-week high of $1,682.90 an ounce after the Fed Open Market Committee (FOMC) statement.

U.S. gold futures settled up $19.10 at $1,679.90 an ounce, with trading volume about 25 percent above the 250-day average due to the February-April rollover ahead of February's first-notice day Friday.

Gold appears to be lifted by resurgent safe-haven demand as U.S. equities dropped after the surprise drop in the GDP number.

Spot silver rose 1.9 percent to $31.98 an ounce.

American Eagle silver coin sales in January surged to an all-time monthly high as the U.S. Mint resumed sales after huge demand triggered a brief suspension, while gold coins also posted their best performance since July 2010.

Nonfarm Payrolls Eyed

In the physical market, gold was supported after a top Indian finance ministry official told Reuters the country does not currently plan additional taxes or curbs on imports of gold as it waits to see the impact of recent tax hikes.

India along with China are the world's largest consumers of physical bullion.

Investors are also waiting for non farm payrolls data on Friday for a close look at the U.S. labor market. Economists surveyed by Reuters expect steady hiring from employers in January.

Platinum group metals were mixed after their recent sharp rallies.

Platinum refiner specialist Johnson Matthey PLC said it saw no upturn in Europe and Japan for its catalytic converter business in the new calendar year, but the weaker markets should be mitigated by slightly more promising prospects in North America. It also cited lower sales in its precious metals unit for the third quarter.

Spot platinum rose 0.4 percent to $1,681.74, while palladium eased 0.2 percent at $745.72, having hit a fresh 16-month high of $757.22 an ounce.

Gold rose on Tuesday, snapping a four-day losing streak, lifted by short-covering and expected continuation of loose U.S. monetary policies.

Platinum and palladium also rebounded after Tuesday's drop as supply worries and hopes for demand recovery triggered strong fund interest. Bullion climbed a day before a Federal Reserve policy statement in which the U.S. central bank is expected to keep short-term interest rates exceptionally low until the U.S. unemployment rate falls to 6.5 percent, inflation permitting.

"What's going to come out of the Fed is more of the same, so we can just anticipate that (quantitative easing) is here at least for a little while longer," said Jeffrey Sica, chief investment officer of SICA Wealth, who oversees more than $1 billion in client assets.

Spot gold rose about 0.5 percent to trade around $1,662 an ounce, recovering from Monday's 2-1/2 week low of $1,651.93. U.S. gold futures for February delivery settled up $7.90, to end the session at $1,660.8.

Open interest in COMEX futures dropped 4 percent on Monday after four consecutive days of price decline, CME data showed, suggesting some investors were buying back their bearish bets after the sharp pullback, traders said.

A drop in the dollar index and U.S. equities' gain also boosted gold. Loose U.S. monetary policy helped drive gold to a 12th year of gains in 2012. There has been growing discomfort among U.S. policymakers about the Fed's bond buying, or quantitative easing (QE), currently running at $85 billion a month, although analysts do not expect any imminent change in Fed policy.

U.S. non-farm payrolls data on Friday will also be examined for clues on the state of the world's largest economy.

Gold prices slipped to start the week, pressured lower by traders who made bets the precious metal would fall.

U.S. gold fell $3.70 to settle Monday at $1,652.90 an ounce. Gold have dropped 1.3 percent so far this year.

Most investors held fire ahead of the U.S. Federal Reserve's policy meeting later this week.

"The market is on hold ahead of the U.S. Federal Reserve's meeting, and expects comments on further quantitative easing measures," MKS Finance's head of marketing Frederic Panizzutti said.

"Today's trade should be pretty quiet, with gold players watching euro/dollar movements, looking for any indication of what is going to happen in the next few days," he added.

(Read More: HSBC Cuts 2013 Gold Forecast)

The Federal Open Market Committee (FOMC) policy statement on Wednesday is likely to provide the next short-term direction for gold. Accommodative policy is seen as positive for the metal, as rampant cash printing would prompt currency debasement.

U.S. non-farm payrolls data on Friday will also be examined for more clues on the state of the world's largest economy.

On the wider markets, the euro held below an 11-month high against the dollar as investors awaited the ECB's monthly data on bank lending to companies and consumers for confirmation that growth is returning to the economy.

Signs that the euro zone crisis is stabilising and the U.S. recovery is gaining traction drove investors to the higher-yielding equity market, sending Wall Street up for the eighth straight day on Friday and out of non-yielding gold.

Iraqi Gold Holdings Decline

The latest gold reserves data from the International Monetary Fund showed Korea and Russia raised their gold holdings in November and December respectively, while Iraq cut its holdings by a quarter in November, reversing some recent efforts to bolster its reserves.

Physical buying ticked up in Asia, but was lacklustre compared to the past few years when buying typically surged ahead of the Lunar New Year festival, including in China, which is vying with India to be the world's top gold consumer.

Gold prices fell to a two-week low on Friday after the European Central Bank said banks would repay 137 billion euros ($183.2 billion) in cheap loans, which reassured investors the euro zone banking system was stabilizing.

Concerns over the stability of the bloc's financial sector had supported demand for gold as a haven from risk. On Friday its failure to rise along with a stronger euro and gains in equities, which have typically boosted prices in the past year, exacerbated investors' lack of confidence, traders said.

Spot gold was last down 0.5 percent at $1,659 an ounce, having earlier touched its lowest since Jan. 11 at $1,655.39 an ounce. Gold priced in euros fell further, touching an eight-month low at 1,230.03 euros an ounce.

"Europe is suddenly in vogue, and those who bought gold as a hedge against it are getting out and into equities instead," Saxo Bank vice president Ole Hansen said. "Euro gold is also hurting some here."

He added: "If I were a hedge fund, I would sit on my hands and wait for a break of $1,700, as we could easily see lower levels before this stabilizes."

The euro hit an 11-month high versus the dollar after the ECB said 278 banks had decided to repay three-year crisis funds at the earliest opportunity next week. The total amount was above the 100 billion euros expected.

Higher repayments, seen as a further evidence that the situation on the financial markets has improved, put additional pressure on the gold price, analysts said.

Global shares also rallied, with European stocks helped by strong economic data out of Germany, which boosted expectations Europe's largest economy could help drag the region out of crisis. U.S. equities opened higher buoyed by sturdy corporate results.

Gold prices extended losses on Thursday, when their failure to break through resistance at $1,695 an ounce after numerous attempts prompted investors to liquidate long positions.

The next market-moving event on the calendar is expected to be a U.S. Federal Reserve statement on Wednesday, which could give more clues on monetary policy, analysts said.

"Accommodative policy is still expected to remain in place for some time, a scenario that continues to be conducive for higher gold prices," UBS analyst Joni Teves said in a note. "And in that sense, the recent pullback should be viewed as an opportunity to pick up metal at more attractive levels."

U.S. gold futures settled down $13.30 at $1,656.60 an ounce.

Physical Interest Emerges v

The price slump of the past few days has triggered some physical buying interest, analysts said.

"We can now see some restocking ahead of the Chinese new year and possibly some restocking in the inventory chain in anticipation of a better economic environment through the first half," SP Angel analyst John Meyer said.

Spot silver was last down 1 percent at $31 an ounce, after hitting a one-week low of $31.39 in earlier trade.

Spot platinum was last 0.6 percent higher at $1,688, on course for a weekly gain, extending its winning streak to a fourth week, its longest in a year. Spot palladium last edged up 1.9 percent to $738 an ounce.

Expectations that global demand for the platinum group metals from the automotive sector will increase in line with an economic recovery underpinned the metals.

Moreover, a move to diesel cars from gasoline engines in the United States is seen as a potential source of buying for platinum in the long term, analysts said. Platinum is used in diesel engines to clean exhaust emissions.

"In the United States, the switch from gasoline to diesel is at a much earlier stage ... around 5 percent of newly sold passenger cars in the United States run on diesel, up from just 1.7 percent in 2008," Natixis said in a note.

"This suggests a structural shift, which should progressively increase demand for platinum in the coming years as the United States embraces ultra-low sulfur diesel amid tightening fuel efficiency requirements," it added.

Gold slid to a one-week low on Thursday, with investors flocking out of the yellow metal to more risk-sensitive assets.

A repeated failure to break above a key chart level hurt investors' confidence in the metal, and gave the market an excuse to sell as U.S. policymakers postponed talks on extending the U.S. debt ceiling.

A recovery in gold prices this month ran out of steam as the metal hit strong resistance at $1,695, its 55-day moving average and early January high. After failing to break decisively above that level for five straight sessions to Wednesday, gold fell.

Spot gold shed more than $16 to stay pinned below $1,670 and was down about one percent in Thursday's trading. U.S. gold futures for February delivery shed $16.80 to finish trading at $1,669.50 an ounce.

"The danger for gold is that if prices are not seen to be trending ever higher, for a lot of holders of gold, that takes away all the rationale for holding it," Natixis analyst Nic Brown said.

"In that case, not only are there a lot of people who are not going to be buying it, but some of the people who've been sitting on it for the last few years may be looking to get out."

(Read More: Gold Bugs Look for a Breakout)

HSBC said in a Global Asset Allocation note dated Wednesday that it has cut back sharply on its exposure to gold, shifting its inflation hedge from the precious metal into treasury inflation-protected securities.

The bank attributed the move to a decline in systematic risks, as the probability of a euro zone breakup fell and "the most apocalyptic" of U.S. fiscal outlooks was avoided.

"Although economic difficulties and policy risks persist, we believe there is now less need for tail-event protection," it said.

"We rebalance our strategic portfolio by considering the distribution of future economic scenarios. We still believe below-trend growth and subdued inflation are likely, but see some improvement in conditions."

Gold also came under pressure from the House of Representatives' decision late on Wednesday to extend the U.S. debt ceiling limit to May 19, avoiding for the time being a repeat of a 2011 standoff that sent gold to record highs at $1,920.30 an ounce, analysts said.

"We suspect that gold was under pressure on Wednesday largely on account of the fact that the U.S. House voted to temporarily suspend the nation's borrowing limit until May 19," INTL FCStone said in a note. "The critical debt ceiling threat seems to have been removed for now."

Indian Demand Languishes

On the physical markets, traders in main gold consumer India reported that they were struggling to sell stocks despite offering discounts to buyers, as the market digested a 50 percent hike in import tax.

Gold dropped on Wednesday, retreating from the previous session's one-month high, as signs of an improving global economy capped investor interest in safe-haven investments.

The metal fell for the first time in the last three sessions, after the European Commission said consumer morale in the euro zone improved sharply in January. Reuters polls also showed that the world economy should perform slightly better this year on recovering Asian growth.

"I don't think there is any reason for investors to own gold any more as the economy is turning around,'' said COMEX gold options floor trader Jonathan Jossen.

Jossen, however, said there is definitely strong buying interest and dip-buying has underpinned the price of gold, and that kept gold from dropping further.

Despite Wednesday's pullback, gold is on track for a fourth consecutive weekly gain, its longest weekly winning streak since September.

Spot gold last fell 0.4 percent to around $1,684 an ounce. It hit a one-month high of $1,695.76 in the previous session but failed to retain upward momentum on lower investment demand and technical resistance.

(Read More: HSBC Cuts 2013 Gold Forecast)

U.S. gold futures settled down $6.50 to $1,686.70 an ounce. Trading volume was on track to finish in line with its 250-day average, preliminary Reuters data showed, partially boosted by February-April contract rollover.

"We can see rather lackluster interest for gold right now, with investors withdrawing some money from the gold market,'' as the global economy shows signs of improvement, said Tobias Merath, global head of commodity research at Credit Suisse.

Bullion holdings at the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, was up 0.3 percent as of Tuesday. However, it has seen an outflow of nearly 15 tons so far this year.

Gold stalled below $1,700 an ounce in early January and has struggled to break through key resistance at the 50-day moving average of $1,690, which has capped prices for the last five sessions, frustrating buyers.

Indian Buying Slackens

Demand in the physical gold market remained strong in most of Asia, but buying by major bullion consumer India was expected to pause in the next few days while the government provides details on tax changes this week, analysts said.

The Indian government lifted the import duty on refined gold to 6 percent from 4 percent and more than doubled the import duty on gold dore bars and ores.

(Read More: Is India Fighting a Losing Battle Against Gold Bugs?)

On silver, a strong inflow into silver-backed exchange-traded funds has helped spot silver prices rally more than 6 percent so far this year.

Holdings of iShares Silver Trust, the world's largest silver ETF, was up nearly 6 percent versus the end of 2012.

Spot silver rose to a five-week high of $32.44 an ounce, extending its rally to a seventh day. It was last up about 0.1 percent at $32.

Among platinum group metals, spot platinum was last down 0.6 percent to $1,684, while palladium last edged down 0.2 percent to $723 per ounce, after the PGMs rallied last week on the back of output cuts in South Africa and better hopes for auto demand.

Gold rose on Tuesday as the Bank of Japan's pledge to launch an economic stimulus effort and a five-year high in U.S. equities prompted nervous investors to buy gold.

The metal rose for a second day after the Bank of Japan said it would switch to an open-ended commitment to buying assets next year and double its inflation target to 2 percent in its most determined effort to boost its stagnant economy.

Bullion has still failed to close above strong technical resistance near its 50-day moving average at $1,690 an ounce as well as the $1,700 mark, even though it had been testing them in the last several sessions.

(Read More: HSBC Cuts 2013 Gold Forecast)

"We've seen quite a bit of selling pressure that's coming at these levels. As S&P and stocks get into this overbought territory, the uncertainty is helping drive money back into precious metals as a safe haven," said Tom Power, senior commodities broker at brokerage RJ O'Brien.

U.S. stocks mostly edged up on Tuesday after ending last week at five-year highs, but gains were limited with investors showing caution as the earnings season picks up speed. On charts, the S&P 500 index's 14-day relative strength index (RSI) rose to near an overbought 70, hovering near its highest since September 2012.

Spot gold was up 0.1 percent at $1,691.24 an ounce. Spot gold has not broken above $1,700 since Dec. 18.

U.S. gold futures for February delivery settled up $6.20 at $1,693.20 an ounce.

Gold prices rose on Monday as stock markets were lifted towards two-year highs by moves to break a budget impasse in the United States, and as the euro steadied ahead of the first euro zone finance ministers' meeting of the year.

Expectations that the Bank of Japan will deliver bold monetary easing also provided support, but the absence of U.S. players, away for the Martin Luther King public holiday, was likely to keep the market subdued, analysts said.

Spot gold was up 0.2 percent to $1,686.80 an ounce at 1404 GMT, after gaining 1.3 percent last week, its biggest one-week rise since late November.

U.S. gold futures for December delivery were down 30 cents an ounce to $1,686.70.

"For today, prices will just linger around current levels as activity is really subdued with the U.S. markets shut, and we expect trading volumes and liquidity to be quite light," UBS analyst Joni Teves said.

"Certainly we can expect better liquidity with the U.S. back tomorrow and price action will have more information from the BoJ tomorrow as well."

Gold players were closely watching European equity movements as euro area finance ministers met in Brussels, with talks on debt-stricken Spain, Ireland, Portugal and Greece on the agenda.

Signs of progress in U.S. debt ceiling talks helped underpin gold as they lifted stocks, which gold has tended to track in the last year.

The Federal Reserve's policy meeting next week will provide clues on the bank's attitude towards monetary stimulus. Any indication of withdrawal of the policy could hurt bullion.

The Japanese central bank's policy meeting ending on Tuesday was also monitored. The BoJ is expected to consider making an open-ended commitment to buy assets until a 2-percent inflation target is reached.

That drove the yen to a 2-1/2-year low and pushed Tokyo's benchmark gold to match a record of 4,911 yen a gram.

Monetary stimulus from central banks helped gold extend its bull run into a twelfth year in 2012, with investors fleeing to hard assets on worries that rampant cash printing would prompt currency debasement.

"Generally easing policies are positive for gold as it is part of the whole accomodative environment from global central banks," Teves said.

Interest Picks Up

Trading interest in precious metals picked up in the week to Jan. 15, according to data from the U.S. Commodity Futures Trading Commission. Speculators raised their net long positions in U.S. gold futures and options by 8 percent in the week ended Jan. 15, the CFTC said.

Silver net long positions gained 6.8 percent to 22,300 contracts. Spot silver was up 0.2 percent at $31.91, having hit a one-month high of $32.11 last week.

Gold prices in India rose as the market factored in the finance ministry's decision to raise the import tax on gold to 6 percent from 4 percent, which will raise the cost of bringing metal into the country.

The upcoming Lunar New Year festivities in Asia, particularly China, which is vying with India to become the world's top gold consumer, have lifted physical gold demand since the start of the year.

Platinum and palladium's upward momentum stalled as investors cashed in recent gains made on supply disruptions in South Africa and a brighter outlook for the world's economy.

Spot platinum was at $1,669.49 an ounce, up 0.1 percent, after hitting a three-month high of $1,701.50 on Thursday. It has lost a premium over gold that it had regained last week for the first time since March.

Spot palladium, which rose to a 16-month low of $730.47 in the previous session, eased 0.6 percent to $713.50.

"For prices to extend their gains, other than an escalation of supply disruptions, demand would need to firm, albeit given the mine closures, a more modest recovery in demand would now be required," Barclays analyst Suki Cooper said in a note.