Gold was poised for its first weekly decline since the middle of August after the dollar rebounded, reducing the appeal of the metal as an alternative investment.

Gold had tumbled to its lowest in two weeks at $720.70 on Thursday and had fallen more than 3 percent since spiking to $747.65 on Monday, the highest since January 1980, but bullion investors remained upbeat due to firm oil, tensions in the Middle East, demand through exchange-traded funds and the U.S. Federal Reserve's recent surprise move to cut interest rates.

The market showed little reaction to news that South Africa's mining minister had ordered the Elandsrand mine owned by Harmony Gold to close for six weeks after an accident that stranded miners underground. Analysts said production loss at the mine would be just a few tonnes.

The $738-742 area appears to be an important resistance area and if gold can clear this hurdle, a re-test of recent highs seems likely.

The dollar headed for the first weekly gain versus the euro since August on speculation a U.S. government report will show hiring rebounded, weakening the Federal Reserve's case for further interest-rate cuts.

The European Central Bank held its benchmark interest rate steady at 4 percent on Thursday, resisting pressure for a cut in the face of a rising euro that some fear will hurt Europe's economies.Markets will be paying close attention to what ECB President Jean-Claude Trichet says about how the central bank plans to ward off more disruption from U.S. subprime credit woes, and the dollar, which has weakened since the U.S. Federal Reserve made a larger-than-expected rate cut. The Bank of England decided to leave its key interest rate unchanged at 5.75 percent, a move most analysts had predicted.

Oil trod water in midday trade, holding onto the bulk of yesterday's gains after dollar weakness and fears a shortage of heating oil may emerge going into the fourth quarter sparked fund buying. Weakness in the US currency makes dollar-denominated oil cheaper for holders of other currencies. However, concerns that the supply and demand balance may be less tight than expected going into the fourth quarter after this week's rise in US crude stocks is keeping a lid on gains.London's benchmark Brent crude contracts for November delivery were down 1 cent at 78.96 usd per barrel.Meanwhile New York crude contracts for November delivery were up 1 cent at 81.45 usd a barrel.

Oil prices were lower on the US inventories news, but rallied after further weakness in the dollar, in which oil is denominated, attracted bargain-hunting funds back to the market. Investors will now be eyeing US economic data due out later this Friday, which includes September non-farm payrolls and the jobless rate, for clues as to the future direction of trade. Weakness in the US economy has fuelled fears that demand may tail off as gasoline prices rise in line with oil's record highs.