Gold set for first weekly fall in five on dollar strength

Gold prices edged lower on Friday, heading for their first weekly decline in five, as a stronger dollar made bullion more expensive for holder of other currencies and offset support from lower US bond yields and weak economic data.

Spot gold was down 0.2% at $1,803.33 per ounce, as of 0314 GMT. Bullion is down 0.4% this week. US gold futures fell 0.1% to $1,803.90.

"Gold being a go to alternative for paper currency and with seeing the dollar bit higher is the catalyst that nudging gold back," said DailyFX currency strategist Ilya Spivak.

The dollar index held close to a 3-1/2-month peak against its rival and was heading for its second straight weekly rise.

Risk appetite in wider financial markets for most of this week was fragile due to worries over the coronavirus' Delta variant impacting global economic recovery, sending investors to take refuge in the dollar.

"We expect gold to remain range bound in the coming weeks. However, inflation will remain a key driver of gold prices in the coming months, supporting prices in the near term," Fitch Solutions said in a note.

Focus now shifts to next week's US Federal Reserve meeting for more clues on monetary policy going forward.

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The European Central Bank on Thursday pledged to keep interest rates at record lows for even longer and warned that the rapidly spreading Delta variant poses a risk to the euro zone's recovery.

Offering some respite to gold, yields on US Treasuries eased after an auction of $16 billion in 10-year TIPS was bid at a record low.

Data showed the number of Americans filing new claims for unemployment benefits rose to a two-month high last week.

Silver slipped 0.5% to $25.34 per ounce and was set for its third weekly fall.

Palladium rose 0.3% to $2,725.19, and platinum was flat at $1,092.64.