Gold reversed gains in high volume on Friday, hit by a dollar spike after several top Federal Reserve officials said the Fed is unlikely to extend its bond-buying stimulus program beyond a planned $600 billion. Bullion lost nearly 2 percent following a brief rally to an all-time high $1,447.40 on Thursday, but the metal is set to post a small gain for the week as Portugal's credit downgrade and escalating political unrest in the Arab world underpinned safe-haven demand.
"After the key technical reversal yesterday, when we could not turn around and blow through the record high, everybody started heading for the door at the same time," said Frank McGhee, head precious metals trader of Integrated Brokerage Services. Spot gold dropped 0.2 percent to $1,426.85 an ounce by 1:07 pm EDT (1707 GMT). US gold futures for April delivery lost 0.5 percent to $1,427.40. COMEX gold was one of the few actively trading commodity markets with volume already topping 210,000 contracts, set for the heaviest trading day in the last two months.
Members of the more hawkish wing of the Fed, including Philadelphia Fed Bank President Charles Plosser said the US central bank will have to reverse its easy money policy in the "not-too-distant future" to avoid sowing the seeds of inflation with the US economy on firmer footing.
Gold investors now look forward to next week's heavyweight economic indicators, including Friday's nonfarm payrolls report, Wednesday's ADP private-sector job data and Thursday's factory orders. Silver lost 0.2 percent to $37.06 an ounce, having retreated from the previous session's 31-year high at $38.13 an ounce. Holdings of the largest silver ETF, the iShares Silver Trust, leapt to a record 11,140 tonnes on Thursday. Platinum dropped 0.4 percent to $1,741.24 an ounce, while palladium fell 0.2 percent to $747.47.