Gold was largely unchanged on Friday, but posted its second-biggest weekly decline this year due to an early week drop after the Federal Reserve withheld additional easing amid a string of encouraging US economic data.

The metal fell 1 per cent earlier in the session after top gold consumer India said it would double import duties on bullion.

Oil's rally, the dollar's weakness and higher US consumer prices in February prompted gold investors to cover short positions from earlier this week.

Some funds might have exited the gold trade after the S&P 500 stock index this week hit 1,400 for the first time in four years after a strong run of US job and manufacturing data confirmed a decent pace of economic recovery.

The metal's 3 per cent slide this week removed gains in January based on expectations of further US monetary easing.

The Fed offered few clues this week on any further action after it said in late January it would keep rates near zero for the next few years.

With bullion now trading well below its long-term technical support, gold could extend losses in the short term before recovering, analysts said.

"Every retracement within this bull trend (since 2001) has managed to find a floor close to the 55-week average," said Tom Fitzpatrick, analyst at CitiFX, Citigroup's technical research unit.

In the next few weeks, gold could test a low at $1,580 an ounce, which could set the stage for another leg higher, Fitzpatrick said.

Spot gold eased 0.1 per cent at $1,656.54 an ounce by 2:53 p.m. EDT (1853 GMT).

US April gold futures settled down $3.70 at $1,657.50 an ounce. Volume was largely in line with its 30-day average but lower than its previous session, preliminary Reuters data showed.

US inflation data for February showed consumer prices rose by the most in 10 months as the cost of gasoline spiked, but there was little sign that underlying inflation pressures were building up.

Also weighing on gold this week was a rise in 10-year US Treasury yields, a gauge for short-term US interest rates, which topped 2.3 per cent, their biggest one-week rise since early July 2011.

Silver is the only precious metal that ended higher for the day, but it was down 4.5 per cent for the week. The weekly decline may have set the stage for even steeper losses with a potential drop to $27.50 an ounce, analysts said.

Barclays Capital technical analysts said silver had been in the process of unwinding its oversold condition. But with silver's break below $33.25. they said silver has reverted the trend and is targeting $30 per ounce.

Silver was up 0.2 per cent on the day at $32.56 an ounce.

India hikes bullion duties

Gold imports to India, the world's top importer, are likely to fall significantly in 2012 as the government's decision to double import duty to 4 per cent is seen squeezing local demand, especially for jewelry, industry officials said.

Bombay Bullion Association President Prithviraj Kothari said the increase would prompt a rise in smuggled gold and impact the jewelry sector more than the investment sector.

"We will have to wait and see how (the import duty) works but from the outlines we are seeing, it will be slightly bearish for gold in the immediate future," MKS Finance head of trading Afshin Nabavi said.

Platinum fell 0.6 per cent to $1,670.24 an ounce, while palladium was down 0.5 per cent on the day at $697.22. – Reuters