Gold rose on Friday to notch its second weekly gain after many investors were soothed by the Federal Reserve's assurance this week that it will be careful in tapering its economic stimulus, although some braced for another decline in bullion.

The spot price of bullion hovered near $1,295 an ounce by 3 p.m. EDT, up 0.8 percent on both the session and the week.

U.S. gold futures for August delivery settled at $1,292.90 an ounce, up 0.7 percent on the day and 1.3 percent on the week.

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On Wednesday, gold tumbled about 1 percent after Fed Chairman Ben Bernanke reiterated the U.S. central bank's intent to scale back later in the year its $85 billion in monthly bond purchases, a program that has fueled precious metal price gains.

The Fed's ultra-loose monetary policy has retained pressure on long-term interest rates while its stimulus has added to fears of inflation, stoking gold prices.

Bernanke, addressing Congress over two days, later said that the Fed's stimulus-tapering plans were not set in stone and depended on the strength of the economy. That helped the gold market recover on Thursday and Friday.

Despite the Fed chief's assurance, some braced for another investor stampede out of gold in the near term.

"I'm still a bear, maybe on the wrong side of the camp, but with the stock market possibly hitting another record and with any slight uptick in interest rates, we could be looking at gold going very quickly below $1,100," said Frank McGhee, chief precious metal at Integrated Broking Services in Chicago.

"This market is so unpredictably violent that it could roll off a couple of hundred dollars in just three sessions."

Bullion has slipped more than 20 percent this year on the Fed's hints that its monthly bond-buying program may end altogether by mid-2014.

ETF OUTFLOWS SLOW

In line with this week's rebound in gold, outflows from SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, slowed to 3.9 tons this week from 22.9 tons last week.

Gold holdings in SPDR are down 416 tons this year, giving investors a fundamental reason to flee bullion.

China's first two newly launched gold exchange-traded funds have raised a total of 1.6 billion yuan ($261 million) in their initial funding round, coming in below expectations due to sliding gold prices and a recent credit scare.

"Chinese buyers may have held back somewhat in anticipation of even lower gold prices," Commerzbank said in a note.

Russia's central bank posted data showing it did not add gold to its reserves for the first time in nine months in June, when bullion prices fell by more than 10 percent to their lowest in nearly three years.

Russia has been the biggest gold buyer in the official sector in the past decade. A shift by central banks from major sellers of bullion to net buyers has been a major support to the gold market in recent years.

Spot silver was at $19.48 an ounce, up 0.6 percent on the day and down nearly 2 percent on the week.

Spot palladium was at $745.50 an ounce, up 0.4 percent for the session and almost 4 percent for the week. Spot platinum hovered above $1,422 an ounce, up 0.7 percent on the day and 1.6 percent on the week.