Bullion rebounded on Friday as the euro lost strength despite better-than-forecast debt auctions by Spain and Italy, while purchases from jewellers and investors, which sent premiums for gold bars to two-year highs, offered additional support.

Silver also bounced after falling more than 3 percent in the previous session, while platinum and palladium held near their multi-year highs on the prospect of more demand from investors and the industrial sector.

Spot gold rose $3.95 to $1,376.70 an ounce by 0505 GMT after trading in a choppy $23 range on Thursday. Bullion struck a lifetime high around $1,430 an ounce in December on fears the euro debt crisis would spread.

We've seen strong physical buying in Asia. It's still going on, said Dick Poon, manager of precious metals at Heraeus in Hong Kong. I think gold is consolidating right now. I am still bullish on gold and silver.

U.S. gold futures for February fell $10.1 to $1,376.9 an ounce to track weakness in U.S. crude oil futures, but the decline was ignored by players in the cash market.

Gold bars were offered at premiums of $3 an ounce to spot London prices in Hong Kong, and at $1.5 in Singapore.

Wang Tao, a Reuters market analyst for commodities and energy technicals, said gold is expected to fall to $1,352.30 per ounce, as the rebound from this level could have completed, and a bullish target at $1,407 is aborted.

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The euro took a breather on Friday, but was still on track to post its best weekly performance against the dollar in 20 months, while equity markets were lacklustre with Japan's Nikkei retreating from an 8-month peak.

European Central Bank President Jean-Claude Trichet renewed a call for euro zone governments to boost the size and scope of their 440 billion euro rescue fund and warned of short-term inflation pressures in the euro area.

Brent crude steadied above $98 on Friday after earlier this week approaching triple-digit figures for the first time in more than two years, outpacing U.S. benchmark prices, which were dragged down by an increase in the country's jobless claims.

Physical dealers noted purchases from jewellers in China ahead of the Lunar New Year in February, where most Chinese return home for the holidays and demand for jewellery increases. Despite the demand from China and also top consumer India, gold was struggling to revisit the $1,400 level.

I think some sort of liquidation on the ETF has a bit of impact on gold. But bargain hunting supports the prices despite some disappointment that prices can't break through $1,400, said a dealer in Hong Kong.

The world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings fell to 1,265.093 tonnes by Jan 13 from 1,271.467 tonnes on Jan 11.

But metals consultancy GFMS Ltd said on Thursday gold could rally to record highs above $1,600 an ounce late this year or early 2012 as safe-haven concerns fuel investment demand.

The official sector, which includes central banks and monetary authorities, swung into net purchases last year for the first time since 1988, as increased buying in emerging markets more than offset gold sales by European central banks, GFMS said in its closely watched Gold Survey 2010 Update.

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