NEW YORK/LONDON Gold prices fell on Friday, breaking ranks with the euro, as sharp gains from earlier in the week based on economic optimism and a Greek bailout deal prompted investors to take profits.
Silver touched a five-month high after climbing past its 200-day moving average. Analysts, however, said it looks vulnerable for a pullback after the sharp rise.
Bullion posted its largest weekly rise in four weeks, as expectations for further easing by China and a near-zero interest-rate outlook for the next several years boosted the metal's inflation-hedge appeal.
News that Europe sealed a rescue package for Greece to avert an imminent chaotic default lifted gold along with the euro and other riskier assets. Other investors bought gold on fears of more European monetary easing and lingering doubts about Greece's ability to implement deep cuts.
"When the debt crisis showed signs of easing, people started to look at gold's correlation with the equity market," said Min Tang-Varner, securities analyst at investment research firm Morningstar.
"It's a delicate balance about whether or not gold is considered a wealth accumulation tool or a commodity," she said.
Spot gold was down 0.5 percent at $1,771.36 an ounce by 2:41 p.m. EST (1941 GMT), heading for a three-percent rise for the week.
The metal is on track for its second consecutive monthly gain after it flirted with entering a bear market in late December.
Gold ignored the dollar's weakness, which usually supports the metal. However, further losses in bullion were limited by inflation fears as Brent crude futures rose above $125 a barrel.
U.S. gold futures for April delivery settled down $9.90 an ounce at $1,776.40. Volume was 25 percent below its 30-day average, preliminary Reuters data showed, largely in line with its recent trading pace.
Gold has risen 13.5 percent this year. However, it appears to struggle to gain further to approach its record at $1,920.30 an ounce.
"It is not our favorite position to go long gold at these high levels," LGT Capital Management analyst Bayram Dincer said. "The potential for disappointment, and price consolidation, is a given."
SILVER SET FOR BIG WEEKLY RISE
Silver peaked at $35.70 an ounce, the highest interday price since September 23. Its rally picked up momentum after breaking through its 200-day moving average at $34.84 on Thursday.
It ended down 0.2 percent at $35.26 an ounce.
Silver prices are up nearly 7 percent this week for their best weekly performance since mid-January. It is set for a gain of nearly 30 percent year to date, making it the best performing precious metal so far in 2012.
The gold/silver ratio, the number of silver ounces needed to buy an ounce of gold, dipped to 50 on Friday, the lowest since late October, as silver prices outperformed.
"Silver looks like it is rallying more with gold than on its own merit, in our view. This may leave it open for a pullback," said James Steel, chief commodity analyst at HSBC.
Platinum group metals, meanwhile, took a breather after hitting five-month highs earlier this week on supply worries related to a strike in top producer South Africa.
Spot platinum was down 0.8 percent at $1,703.60 an ounce, while spot palladium was down 1.5 percent at $705.95 an ounce.
(Editing by Bob Burgdorfer; Editing by Alden Bentley)