Gold prices eased on Friday as gains from a weak dollar was offset by profit-taking at the end of a year in which bullion gained about more than 8 percent, snapping three years of declines.
In the first half of 2016, investors increased gold exposure as the Federal Reserve showed caution on raising interest rates due to concerns about global growth, while Britain's vote to leave the European Union curbed appetite for risk and pushed the metal to a two-year high in July.
Spot gold reached its highest since Dec. 14 at $1,163.14 an ounce, before retreating 0.7 percent to $1,150.5 per ounce. Prices were up about 8.5 percent annually, its biggest increase since 2011.
U.S. gold futures ended the session 0.6 percent lower at $1,151.7 per ounce.
Gold prices fell more than 8 percent in November, on higher U.S. Treasury yields after Donald Trump's presidential election win led to speculation his commitment t infrastructure spending would spur growth.
Bullion hit a 10-month low on Dec. 15 as solid U.S. economic data gave the Fed the confidence to raise rates for the first time in a year. The central bank signalled three more increases next year from the previous projection of two.
"Because the stock market has been flirting with the 20,000 range, it's been relatively calm and we haven't gotten the flight to safety trade that we sometimes get with gold," said Jeffrey Sica, president and chief investment officer of Sica Wealth Management.
"Still we are building a position in gold primarily because we think the stock market is going to hit some turbulence ... and a major calamity coming out of Europe that's going to cause a lot of money to go into the gold markets."
The precious metal is often seen as a hedge against geopolitical risks.
The dollar pared some losses against a basket of six currencies as the session progressed, pressuring gold. U.S. Treasury yields will remain a key driver for gold's movements, analysts said.
Returns from U.S. bonds are closely watched by the gold market, given that the metal pays no interest.
Other precious metals were also set to end the year in positive territory, with palladium the best performer, up more than 21 percent in 2016. It was up 1.3 percent on the day at $680.75 an ounce.
Platinum gained 0.1 percent to $898.55 for the session and rose marginally for the year, its first annual gain in four years.
The spread between platinum and palladium contracted to its narrowest in nearly 15 years earlier this month at $141 an ounce, as palladium, mostly used in autocatalysts, benefited from higher car demand in China and the United States and dwindling supply.
"A sharply widening deficit ... is likely to propel palladium higher as scope for mine output remains limited and industrial and auto demand firm," HSBC said in a note.
Silver was down 1.4 percent at $15.92, but ended the year about 15 percent higher, its best year since 2010.
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