updated 5/12/2006 4:13:11 PM ET 2006-05-12T20:13:11

Gold prices fell Friday, but ended the week with a gain of more than $30 an ounce.

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The metal rallied sharply this week above $700 an ounce to 26-year highs, fueled by fund buying. Investors are turning to the safe-haven metal due mainly to a weakening U.S. dollar, worries about inflation, and geopolitical instability.

After climbing more than 6 percent over the past three days, June gold futures pulled back to settle at $711.80 an ounce on the New York Mercantile Exchange, down $9.70 on the day. The contract moved as high as $732 an ounce in electronic trading — the highest futures level since September 1980.

"Tireless as a Tour de France cyclist, the gold market has now appreciated better than 70 percent over the past year for a $300 dollar gain," said Jon Nadler, an investment products analyst at bullion dealers Kitco.com.

"To say that gold is climbing a wall of worry is to understate the situation quite a bit — this is starting to look more like a wall of panic," he said. "But, like the cyclists, gold must also rest occasionally."

The dollar was mixed Friday, gaining ground against Japan's yen and paring losses against the euro following a report that showed the U.S. trade deficit narrowing in March. Gold is usually regarded as a hedge against the U.S. currency.

The Federal Reserve's statement Wednesday may have deflated the equity market, but it hasn't braked the momentum in metals, said Edward Meir, an analyst at Man Financial.

"At this point, rising interest rates in the United States do not seem to be denting economic growth much," he said. "We think the weakness could become more apparent early next year, when rising interest rates begin to have more bite. But for now, there is no noticeable slowdown in growth, allowing the commodity bulls more or less free rein."

With gold prices approaching $750, Dale Doelling, chief market technician at Trends In Commodities, said he doesn't see a peak anytime soon.

"Not only do I believe that we're not at a major top, but I think this bull market may just be building a full head of steam," he said.

He added, "I will be very surprised if gold doesn't break the $1,000 barrier before summer turns to fall."

Elsewhere in metals, July platinum settled up $22.90 at $1,318.50 an ounce, extending Thursday's strength to touch a record at $1,340. June palladium lost $1.65 to settle at $398.35 an ounce, after trading at a four-year high of $409.

July copper eased back 5.9 cents to settle at $3.864 a pound, reversing after rising to a record above $4 in Thursday's session, and July silver dropped 70 cents to settle at $14.235 an ounce after reaching a 25-year high of $15.20 on Thursday.

On the supply side, gold inventories were unchanged at 7.67 million troy ounces as of late Thursday, according to Nymex data. Silver supplies were down 34,208 troy ounces at 123.5 million. Copper supplies fell 338 short tons to 13,912 short tons.

After tapping never-before-seen levels on Thursday, the benchmarks that track stocks in the metals-mining sector headed lower to close out the week.

The Philadelphia Gold and Silver Index was down 4.4 percent at 158.77 and the CBOE Gold Index retreated to 160.96, down 4.7 percent — this after touching a lofty 175.05.

The Amex Gold Bugs Index stood at 368.03, losing 5 percent.

Among individual standouts, shares of Randgold Resources fell 12.1 percent to $21.69 and Hecla Mining lost 9.3 percent to trade at $5.49.

Copyright 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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