Gold dropped on Friday as early buying linked to crumbling stock markets subsided, but a rise in ETF holdings to a record high indicated persistent worries over the global economy.

Investors were also looking to the Group of 20 summit this weekend in Toronto, where leaders from rich and developing nations will discuss how to plot the world's emergence from the worst financial crisis since the Great Depression.

But any disagreements over the best way to ensure both growth and fiscal responsibility add to global economic uncertainty, which dealers said could lift gold's safe-haven appeal.

Spot gold fell 70 cents to $1,243.35 by 0549 GMT, having hit an intraday high of $1,245.85, heading for a weekly loss of nearly 2 percent from a record $1264.90 hit on Monday.

Gold gained nearly 1 percent toward $1,250 on Thursday as U.S. stocks tumbled.

There's still a lot of uncertainty toward a recovery. That's why they are putting their bets into gold, said Wong Eng Soon, investment analyst at Phillip Futures in Singapore, referring to investor interest in exchange-traded funds.

Gold was still consolidating after hitting an all-time high this week but a correction was unlikely to send the price below $1,225 an ounce, said Wong.

The world's largest gold-backed exchange-traded fund, SPDR Gold Trust (GLD.P) said its holdings rose to a record high at 1,316.177 tonnes as of June 24 from the previous high of 1,313.135 tonnes set on June 22.

Despite repeated setbacks, it is not looking all that bad for investors and speculators who are betting on rising gold prices, said Heraeus Precious Metals in a weekly report.

At least the general environment has not changed much.

U.S. gold futures for August delivery fell $1.8 an ounce to $1,244.1. It had settled around $11 higher on Thursday as lingering European credit contagion fears pressured equity markets.

But a lack of demand from the jewelry sector could weigh on gold, which has struggled to make further headway since hitting a record high at the start of the week, said dealers.

It's obvious that gold is losing strength. A switch reversal after each attempt to break new highs confirms that a further rise may attract profit taking, although a price dip could also be limited, said Pradeep Unni, senior analyst and trader at Richcomm Global Services in Dubai.

Asian stocks on Friday slid for a fourth straight session, driven by expectations of tighter financial regulation ahead of the G20 meeting, while the euro was little moved at $1.2330, retaining gains made on Thursday.

Oil prices edged higher after a U.S. government forecaster said that a weather system headed toward the oil-rich Gulf of Mexico may develop into a tropical cyclone.

(Editing by Ed Lane)

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