Underlying market sentiment remains solid on bullish supply/demand fundamentals and positive technical signs, and gold prices could resume their upturn after the New Year holidays, brokers said.
The benchmark December 2006 contract on the Tokyo Commodity Exchange finished down 12 yen, or 0.6 percent, at 1,973 yen per gram after trading between 1,955 and 1,974.
Other months closed 2 to 16 yen lower.
"A fall in the spot gold price prompted long liquidation of TOCOM futures, but there were no aggressive sellers as the yen continued to show weakness against the dollar," one broker said.
Spot gold was quoted at $513.25/514.00 an ounce at 0250 GMT, down from $515.70/516.40 last quoted in New York.
Still, TOCOM's benchmark gold has recovered nearly half of the losses it suffered in a plunge from an 18-year high of 2,155 yen on December 12 to a low of 1,830 yen on December 16.
Turnover was light at 28,493 lots on Friday, as operators mostly stayed on the sidelines ahead of the holidays. TOCOM will be closed on Monday and Tuesday for the New Year holidays and will hold a half-day session on Wednesday. The exchange will be closed again on January 9 for a national holiday.
"I think slow trade will continue until TOCOM participants fully come back from holidays on January 10," the broker said. The rally in TOCOM gold accelerated in the second half of the year as Japanese investors, frustrated by near-zero interest rates at home, shifted money into the metal in hopes of price gains.
Spot gold prices surged to $540.90 on December 12, its highest in almost 25 years, amid worries about inflation and geopolitics. The yen's declining trend against the dollar also strengthened investor interest in TOCOM, as a weaker yen has the effect of raising yen-based gold prices.
The United States currency has risen about 15 percent against the yen and the euro this year as the Federal Reserve's repeated interest rate hikes have made dollar investments more attractive.
The dollar was trading at around 117.80 yen as of 0235 GMT, barely changed from its level in late US trade.
Friday's closing price of TOCOM's benchmark gold is up 42 percent, or 588 yen, from the year's low of 1,385 yen set in January.
In the platinum market, TOCOM's benchmark December 2006 contract closed down 27 yen per gram at 3,672, tracking losses in New York.
Spot platinum was quoted at $962/967 an ounce at 0250 GMT, against $963/967 in late New York.