Gold backed down from its early highs on Friday as investors locked in profits ahead of the weekend after the market met tough technical resistance, but sentiment stayed strong amid a weaker dollar and firm oil prices.

Cash gold peaked at a one-week high of $640,50 an ounce on Thursday, which was up 6,5 percent from this week’s low of $601,60 reached on Monday.

Bullion climbed as high as $637,25 in early Asian trade, but it ran out of steam before reaching Thursday’s high. Its subsequent slide picked up speed after the price dropped below the 14-day moving average around $635,39.

As of 04:09 GMT, spot gold was trading at $631,50/632,50 an ounce, down from $633,50/634,25 late in New York on Thursday.

“There is strong resistance around $640. The market would need new bullish factors in order to test highs again,” said Akira Doi, a director at Daiichi Commodities Co Ltd.

“The market is a bit careful about building large positions before the ECB and Federal Reserve meetings in August, which should keep prices moving in a boxed range.”

Falls in Tokyo Commodity Exchange gold futures also put a drag on the spot gold price.

The benchmark June TOCOM gold contract was trading at 2 365 yen a gram, down 12 yen or 0,5 percent from Thursday’s close of 2 377 yen.

TOCOM gold dropped sharply as strong profit-taking emerged after hitting a session high of 2 400 yen in the morning.

Still, concerns over the situation in the Middle East may prevent gold from falling sharply below the psychologically $600 line.

Israel has called up 15 000 reserve soldiers but ruled out a full-scale invasion of Lebanon against Hizbollah, as diplomatic divisions appeared to widen on Friday over how to end the 17-day-old conflict.

Al Qaeda’s deputy leader, Ayman al Zawahri, said his group would not stand by and watch Israel bombard Lebanon and the Palestinians, calling on Muslims in a video aired on Thursday to fight those who support the attacks.

On charts, the 100-day MA of around $618 for spot gold was seen as an important support level.

Investment funds were also keen to buy gold on dips amid a weaker dollar and strong oil prices.

The dollar was under pressure due to fading expectations the Fed will raise interest rates further.

Gold often moves in the opposite direction to the dollar as some investors use it as an alternative to the US currency.

Crude oil prices remained firm, which encouraged investors to buy gold as a hedge against inflation.

Other precious metals fell along with gold as investors concentrated on squaring their positions ahead of the weekend.

Platinum fell to $1 221/1 226 an ounce from $1 227/1 233 in New York.

Sister metal palladium eased to $312,50/317,50 an ounce from $313/318 in New York.

Silver fell to $11,29/11,36 an ounce from $11,32/11,42 late in New York.