SAN FRANCISCO (MarketWatch) — Gold futures dropped more than $20 an ounce Friday to tally a 2% weekly loss as some disappointment over recent corporate earnings, U.S. economic data and the latest European summit drove gains for the U.S. dollar.

“Fear of the future in the U.S. and in the euro-zone (fiscal cliff and debt crisis) is an undercurrent in all markets, including precious metals” for now, said Julian Phillips, South Africa-based founder and writer at GoldForecaster.com. “Gold may slip below $1,700 for a brief time, before rebounding.”

Gold for December delivery GCZ22, +1.05% fell $20.70, or 1.2%, to settle at $1,724 an ounce on the Comex division of the New York Mercantile Exchange. That was the lowest settlement for futures prices since early September, according to FactSet.

Prices, which closed with a loss of $8.30 on Thursday, closed 2% lower for the week, for their second weekly loss in a row.

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“Gold remains defensive going into the weekend after a catalyst to drive the yellow metal above important resistance at $1,800/$1,802.89 failed to materialize,” said Peter Grant, chief market analyst at USAGOLD.

“Disappointing U.S. earnings are adding additional weight to equities, which is resulting in some deleveraging pressures,” he said. “Such pressures tend to support the dollar, and at least initially, suppress gold.”

A report released Friday said U.S. existing home sales declined 1.7% in September to a seasonally-adjusted annual rate of 4.75 million. Economists polled by MarketWatch had expected a rate of 4.8 million. See: Sales of existing home sales decline 1.7% in September.

The dollar extended its gains after the housing data. Strength in the greenback in turn tends to hurt dollar-denominated commodities such as gold.

The dollar index DXY, +0.22% , which measures the greenback against a basket of six currencies, rose to 79.634 from 79.207 in late North American trading on Thursday. See: Dollar gains as investors seek a safe haven.

U.S. stocks fell sharply on quarterly earnings disappointments from industry heavy hitters. See: U.S. stocks hammered on earnings news.

In South Africa, some gold miners who faced dismissal for going on an illegal strike returned to work at Gold Fields Ltd. GFI, +5.04% , but about 8,500 of the 12,500 employees didn’t return to work at the KDC East mine, the company said. Gold Fields has issued a “final ultimatum” to those employees. The strike at Anglo American Platinum Ltd. US:AGPPY, which began last month, continued. See: What strikes in South Africa really mean to metals.

Gold factors

The dollar found added support, pressuring gold further, as heads of the 17-nation euro zone agreed Friday to continue their pursuit of a single banking supervisor.

One-kilogram gold bars at the Korea Gold Exchange. Reuters

“Another generally disappointing [European Union] summit that once again failed to address the underlying imbalances is weighing on the euro and European stocks, amid heightened risk aversion,” said USAGOLD’s Grant.

“The agreement to make the [European Central Bank] the supervisor of euro-zone banks by year-end is being touted,” said Grant, “but the market clearly doesn’t share the enthusiasm of French President Hollande, who declared last night, ‘Tonight, I have the confirmation that the worst is behind us.’ ”

Vedant Mimani, lead portfolio manager of the Atyant Capital Global Opportunities Fund, pointed out that the “critical technical levels” for gold at $1,730, and for silver at $32.50, the lows made earlier this week, did not hold on Friday. “This is problematic for the bull case,” he said.

For now, the path of least resistance for gold is down, said Ned Schmidt, editor of the Value View Gold Report. “Downside on gold is $1,650. Silver remains a long-term sale,” he said.

December silver futures SIZ22, +0.79% shed 77 cents, or 2.4%, to settle at $32.10 an ounce — to be the biggest decliner among the major metals for the week, down 4.7%.

Among other metals, platinum for January delivery US:PLF3 fell $28.20, or 1.7%, to end at $1,615.50 an ounce — 2.6% lower than a week ago. December palladium US:PAZ2 fell $24.20, or 3.7%, to $623 an ounce, down about 2.5% from last Friday.