Gold has been in freefall during the past few days, at one point sliding to US$1,370/oz just a couple of days after setting a new record at US$1,431/oz.
At the beginning of the week, gold was supported by comments made by Ben Bernanke on the 60 Minutes news show on CBS.
The Fed Chairman said that the US$600 billion bond purchase programme announced a month ago could be expended, increasing gold’s appeal as an inflation hedge.
It was reported on Friday that unemployment in the US increased from 9.6% to 9.8% in November, while non-farm payrolls increased by just 39,000, which analysts expected a gain of well over 100,000.
By injecting money into the economy, the Federal Reserve is aiming to drive up inflation to encourage spending and reduce unemployment.
Gold advanced further after US President Barack Obama agreed to extend tax breaks introduced by his predecessor George W Bush.
Goldman Sachs (NYSE:GS) said that this would bring a fiscal stimulus of US$185 billion to the US economy.
The move weakened the US dollar, prompting investors to pour money into gold, which is seen as an alternative asset to the American currency.
Later in the week, the euro gained against the US dollar after the Irish government unveiled the toughest budget in the country’s history, aiming to reduce the ballooning sovereign debt.
However, the US dollar rebounded later in the week and investors engaged in profit taking, sending gold below US$1,400/oz.
Gold recovered as demand from bargain hunters increased after gold fell to nearly US$1,370/oz.
However, gold remains under pressure from expectations of further monetary policy tightening moves by China, which has just upped the reserve requirements for its banks by 50 basis points.
Gold ended the week at US$1,385/oz.
Silver declined from US$29.38/oz to US$28.68/oz, while platinum fell from US$1,725/oz to US$1,679/oz.
Major mining stocks were mixed. Randgold Resources (LON:RRS) slipped from 6,030 pence to 5,605 pence, while fellow gold producer African Barrick Gold (LON:ABG) climbed from 559 pence to 603 pence.
Silver miner Fresnillo (LON:FRES) fell from 1,568 pence to 1,533 pence and Lonmin (LON:LMI) advanced from 1,822 pence to 1,857 pence.
Midcaps fell into the same pattern. Gold miner Petropavlovsk (LON:POG) rose from 1,130 pence to 1,158 pence.
Aquarius Platinum (LON:AQP) edged lower, moving from 354 pence to 348 pence and silver producer Hochschild Mining (LON:HOC) retreated from 613 pence to 605 pence.