Gold edged higher on Friday as buyers slowly returned to the market, lured by Wednesday's plunge of 5 percent, although bullion is still looking at its worst week since December.

US Federal Reserve Chairman Ben Bernanke's lack of a reference to further quantitative easing at congressional testimony on Wednesday sparked a heavy sell-off in bullion, sending the metal to a one-month low short of $1,700.

Gold's fall to the lower end of its previous range showed the lack of conviction required to push prices above $1,800 or higher, but analysts and traders saw Wednesday's plunge as a healthy correction rather than the end of the bull run.

"The broader macro backdrop remains gold-favourable, given the negative interest rate environment, longer-term inflationary concerns and lingering sovereign debt uncertainties," Barclays Capital said in a research note. But it added dollar strength, broad risk reduction and profit-taking could pose near-term hurdles for gold.

Spot gold inched up 0.2 percent to $1,720.09 an ounce by 0334 GMT, on course for a weekly decline of 3.4 percent, its biggest one-week fall since mid-December. US gold was little changed at $1,721.50.

Technical analysis suggested that spot gold could face resistance at $1,726 during the day, said Reuters market analyst Wang Tao. Holdings in gold-backed exchange-traded funds gained 238,674 ounces to a record high of 70.76 million ounces, suggesting investors remained keen on gold.

The gold-platinum spread fell to just above $16 an ounce, its lowest since mid-September, as supply disruption in South Africa remains a concern, and upbeat US auto sales data helped.

Spot platinum gained half a percent to $35.30 an ounce, headed for a loss of 0.2 percent over the week. The metal, mainly used to produce jewellery and autocatalysts, has risen 22 percent so far this year, compared to a gain of 10 percent in gold. 
"I'm of the opinion that gold's premium over platinum should be corrected in due time, but I didn't expect it to come so quickly," said Yuichi Ikemizu, head of commodity trading, Japan, at Standard Bank.

The focus remains on Impala Platinum, the world's second-largest platinum producer, which has suffered 100,000 ounces of lost production in a six-week-long strike at its key Rustenburg mine. The company said it would restart production on March 5. - Reuters