Gold ticked lower on Friday, after rising more than 1 percent the previous day, as investors took to the sidelines ahead of U.S. January non-farm payroll data, which could dent bullion's appeal.

Most indicators have suggested the U.S. economy is picking up, with growth in the services sector rising to its highest in more than five years and inflation pressures appearing mostly under control even as commodity prices surge.

Gold [XAU=X  Unavailable      ()   ] fell $2.63 to $1,350.62 in Asian trade, but was heading for its biggest weekly gain since early January. Prices had surged on Thursday on buying by exchange traded funds and safe haven demand spurred by turmoil in Egypt.

Bullion struck a record around $1,430 in December. 

The U.S. data could have some impact on the dollar and consequently on gold, while unrest in Egypt was causing a lot of concerns among investors, said Darren Heathcote, head of trading at Investec Australia in Sydney.

"I am still thinking as well that investors are concerned about inflation and still looking at gold as a positive hedge against that," he added. 

Investors are paying close attention to Friday's U.S. January non-farm payroll data, which could trigger selling in bullion if the report promotes an optimistic view of the economy.

Economists polled by Reuters estimated 145,000 jobs were added to U.S. non-farm payrolls in January, after just 103,000 new jobs were added in December.

But tension in the Middle East, which lifted oil prices, and a slight increase in ETF holdings could cushion the fall.  

President Hosni Mubarak ruled out resigning immediately to end a violent confrontation over his 30-year-rule, arguing this would bring chaos to Egypt, but the New York Times said the Obama administration was in talks with Egyptian officials for him to quit now.

Oil [CLC1  Unavailable      ()   ] rebounded on Friday, with Brent still above $102, with the focus on Egypt's volatile situation ahead of Friday prayers, and the U.S. employment data.

The world's largest gold-backed exchange-traded fund, SPDR Gold Trust [GLD 132.20    1.75  (+1.34%)   ], said its holdings rose slightly to 1,229.277 tonnes by Feb. 3 from 1,227.153 tonnes on Jan 31.

U.S. gold futures for April fell $1.6 to $1,351.4 an ounce. Markets in Singapore, Hong Kong and China are closed for the Lunar New Year.

In the physical sector, premiums for gold bars slipped to $1 an ounce to the spot London prices in Tokyo from $2 earlier this week -- their highest in two years.

"The industrial sector is very quite because of the Chinese New Year and the general public thinks the current price is already too high for investment," said a dealer in Tokyo.

"They have bought earlier. That's why premiums have declined a bit at this moment. It's just a quiet market."