* TSX ends day down 5.51 pts at 12,725.77
* Notches highest weekly gain this year
* Gold sector retreat weighsweigh
* Pending ECB credit easing lifts sentiment
By Jon Cook
TORONTO, Feb 24 (Reuters) - A three-day rally by Canadian stocks fizzled on Friday as a pullback in bullion prices knocked gold miners lower, offsetting a boost from rising oil prices and optimism over a further easing of the European debt crisis.
While Toronto's main stock index ended slightly lower on the day, it still notched its best weekly gain this year, rising more than 2 percent on the strength of a long-awaited Greek debt swap deal and further signs of U.S. economic health.
"We've taken the systemic risk issue off the table, at least in the short term. We have stronger than expected U.S. economic data and we have reasonable evaluations," said Paul Taylor chief investment officer at BMO Harris Investment Management. "Equities trade higher on that."
The Toronto Stock Exchange's S&P/TSX composite index closed down 5.51 points at 12,725.77.
The heavyweight materials sector slid 0.8 percent, pulled lower by gold miners as bullion retreated from the three-month high it hit on Thursday.
Barrick Gold and Goldcorp, Canada's top gold producers, both slid more than 1 percent, with Barrick finishing at C$48.85 and Goldcorp at C$48.64.
Iamgold Corp plunged 9.1 percent to C$15.90 after the miner reported an increase in quarterly net profit on Thursday, but said adjusted earnings from continuing operations fell 9 percent and costs rose 20 percent.
Eldorado Gold defied the broader drop, rising 1.3 percent to C$15.05 after it reported a more than 50 percent increase in 2011 earnings from operations.
The gold price has risen more than 13 percent this year, but its safe-haven status over the last few months has been hurt as fears about the European and U.S. economies have eased.
Markets were gearing up on Friday for a second three-year financing operation by the European Central bank next week, which is expected to provide nearly half a trillion euros of cheap cash and ease concerns about bank funding.
The ECB move could hurt gold prices, said Gavin Graham, president at Graham Investment Strategy, adding it "may help stimulate growth and therefore the threat of deflation is reduced so you don't need a safe haven as much."
Most of the index's 10 main sectors rose on Friday, led by oil and gas producers, which edged up 0.2 percent as Brent and U.S. crude prices reached their highest levels in nearly 10 months on escalating tensions between Iran and the West.
"The question is how long does it remain elevated," said Taylor. "It's only when it persists beyond a quarter or more that consumer behavior is actually affected."
Suncor Energy led the sector higher, rising 1.6 percent to C$36.97. Nexen Inc climbed 1.3 percent to C$21.13 after it said oil production had begun at its Usan field offshore West Africa.
Strong corporate earnings also helped keep the TSX near break even. Shares of Magna International Inc, one of the world's biggest auto parts manufacturers, rose 5.4 percent to C$47.36 a day after it reported a big jump in quarterly earnings and increased its dividend by 10 percent.