Gold bounced back in Europe on Friday as the dollar sharply fell after a government report showed weaker-than-expected U.S. economic growth in the second quarter, lowering expectations for an interest rate hike.

Spot gold fell as low as $625.60 an ounce before rebounding to $636.00/637.50 by 1411 GMT, against $633.50/634.25 in New York late on Thursday.

"It's following the dollar today. The figures came out and there was a complete reversal," said a metals dealer in London.

"Going into the weekend, you never know what's going to go on and a lot of people buy as a bit of insurance. At the moment gold is looking good and if it takes out $645, you can have further moves up," he added.

The U.S. Gross domestic product grew at a 2.5 percent annual rate in the April-June quarter, well below Wall Street analysts' forecasts for 3 percent and less than half the robust 5.6 percent rate registered in the first quarter.

The U.S. Federal Reserve has signalled it expects an economic slowdown to cool inflation, stoking expectations of a pause in a two-year credit tightening campaign.

A rise in the interest rate tends to help the dollar and is generally negative for gold. Gold often moves in the opposite direction to the U.S. currency as some people use it as an alternative investment.

Some traders said people were nervous in the market because of a lack of clear direction and gold was expected to remain to volatile in the coming days.

"Going forward, dollar movements will likely dictate near-term gold direction," HSBC Bank said in a daily note.

Traders said concerns over the situation in the Middle East may prevent gold from falling sharply.

Intense Israeli bombardment killed 13 people in Lebanon on Friday, while U.S. Secretary of State Condoleezza Rice said she would return to the region only when the time was right for a lasting solution to the crisis.

Oil fell below $75 a barrel, but concerns about a prolonged cut in Nigerian oil output and violence in the Middle East were expected to limit selling.

Gold is generally seen as a hedge against inflation.

In other metals, platinum fell to $1,216/1,221 an ounce from $1,227/1,233 in New York, while palladium was at $309/314 an ounce, down from $313/318 in New York.

Silver inched down to $11.28/11.38 an ounce from $11.32/11.42.