Silver attracted selling that knocked the metal off a three-month high in Europe on Friday, while a stronger dollar eroded gold prices. Spot silver earlier matched Thursday's peak of $12.89 an ounce, its highest since May, but then fell to $12.72/12.79 by 1425 GMT. That was also down on its late New York level overnight of $12.83/12.90.
Strong investor demand for the metal has lifted prices by more than a third since the middle of June. Overnight news of a drop in output in world number two silver producer Mexico was also supportive. "Silver, we believe, is benefiting from deliberate decisions to express a positive precious metals and negative dollar view without worrying about central bank selling, a factor that is concerning gold investors," John Reade, analyst at UBS Investment Bank, said.
"From here if gold rallies in line with our expectations silver's outperformance is likely to continue."
Silver has outperformed gold in the past month, gaining 14 percent versus a drop of 1.6 percent in bullion. Investor enthusiasm for a new silver investment tool has added to its allure. Physical holdings in Barclays Global Investors' iShares Silver Trust climbed above 100 million ounces on Wednesday for the first time since the ETF was launched in late April.
GOLD STUCK: Spot gold fell to $621.80/622.80 an ounce from $625.20/626.20 late in New York, undermined by a firmer dollar and profit-taking ahead of a long weekend in the United States.
Prices have failed several times to make headway above the upper $620s level, although dollar and geopolitical uncertainties were likely to prevent aggressive selling. The US market will be closed on Monday for the Labour Day public holiday.
"The driving forces are...Iran, inflation and interest rates. Those are all positives at the moment for gold, but the technical picture looks weaker as it failed to make headway yesterday," Wolfgang Wreszniok-Rossbach, head of precious metals marketing at Germany's Heraeus, said.
Gold's descent picked up pace after US data showed the economy created slightly more jobs than expected in August, which prompted the dollar to rise. "I think we could see it drift off a bit towards $618, but if it holds there, we should be OK," one trader said.
"But up until the end of the year, I think it could struggle a bit. The momentum seems to have dropped...I am a bit concerned that some of the funds might be getting a bit bored with it." The trader added that any deterioration in Iran's stand-off with the West, would have a positive impact on gold due to its safe-haven role.
Prices would also be led to an extent by oil, which on Friday steadied above $70 a barrel. Platinum rose to $1,242/1,247 from $1,239/1,244, while palladium was little changed at $342/47 versus New York's previous $341.50/346.50.