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) --

Gold prices

were dropping on Friday as investors eased off their positions heading into the weekend.

Gold for April delivery was falling $6 to $1,607.80 an ounce at the Comex division of the New York Mercantile Exchange. The

gold price traded as high as $1,615.30 and as low as $1,602.60 an ounce, while the spot price was falling $6.50, according to

"What we haven't managed is to break through important levels, which indicates that there's been some recent selling into this move higher, and that obviously leaves quite a lot of new long investors a bit nervous here as we head into the weekend," said Ole Hansen, head of commodities strategy at Saxo Bank in Copenhagen.

Gold prices rallied this week after news emerged that banks in Cyprus, a small island nation-state in the Mediterranean, faced insolvency. The European Central Bank had said it would only release emergency funds to the country's banks if Cyprus considered a tax on all bank deposits there.

Though the Cypriot parliament voted down the measure, it rattled many investors in Europe who were still uncertain how the country would craft a bailout plan. Concerns about Cyprus also weakened the euro and drove the U.S. dollar higher against it.

After the markets digested Cyprus' woes, the

Federal Reserve

reported on Wednesday its latest policy-making announcement and economic forecasts. By Thursday morning, it appeared that gold traders saw the Fed's statement and Chairmen Ben Bernanke's press conference as positive for the yellow metal because language from the Fed suggested the central bank wouldn't be scaling back its quantitative easing programs before the end of 2013.

Investors have kept their eyes on gold's technicals. The precious metal closed above the psychological $1,600 an ounce threshold on Monday, and all week has found lower-bound support at that level. But a lack of a huge surge higher in light of the Cyprus news has left analysts cautious of gold's current range.

"But I think more important than the short term, the psychological $1,600

support are the levels down around $1,585

an ounce," Stanley Dash, vice president of applied technical analysis at TradeStation Securities, said in an interview. "We've pulled off the lows a little bit, momentum has eased, we're not so oversold, we're a little more neutral on momentum."

Dash said the nearest resistance levels on weekly charts is at about $1,628 an ounce.

Silver prices

for May delivery were slipping 55 cents to $28.66 an ounce, while the

U.S. dollar index

was dropping 0.43% to $82.50.

Gold mining stocks were mixed on Friday. Shares of

Gold Fields

(GFI) - Get Free Report

were sliding 2.3%, but shares of

Eldorado Gold

(EGO) - Get Free Report

were adding 1.4%.

Among volume leaders, Eldorado Gold was slightly outpacing

Barrick Gold


, which was trading 2.3 million shares as the stock was losing 0.88%.

Gold ETF

SPDR Gold Trust

(GLD) - Get Free Report

was off 0.35%, while

iShares Gold Trust

(IAU) - Get Free Report

was down 0.26%.

-- Written by Joe Deaux in New York.

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