Gold inches higher; set for weekly loss as dollar holds firm

Gold prices recovered on Friday after sliding to an over one-month low in the previous session, though a firm dollar set the metal on course for a weekly decline as investors awaited next week's key U.S. Federal Reserve policy meeting.

Spot gold edged up 0.3% to $1,758.10 per ounce by 0329 GMT, while U.S. gold futures gained 0.2% to $1,759.50. The precious metal has declined 1.6% this week.

"While support at $1,750 has so far held, with some speculative short-covering lifting prices slightly, the bounce looks anaemic and gold faces another test of $,1750 as the dollar remains firm," said Jeffrey Halley, a senior market analyst for Asia Pacific at OANDA.

The dollar held close to a near three-week peak on Friday, increasing gold's cost for buyers holding other currencies.

"If $1,750 breaks, gold could target the $1,715 area, and potentially long-term support around $1,675," Halley added.

Bullion slipped as much as 2.7% on Thursday, as the dollar index jumped after an unexpected increase in U.S. retail sales last month raised expectations of the Federal Reserve potentially reducing its stimulus sooner.

Gold drops on stronger dollar as investors strap in for Fed meet

The Federal Open Market Committee's two-day policy meeting is due to be held on Sept. 21-22.

Reduced central bank stimulus tends to lift bond yields, which raises the opportunity cost of holding non-interest bearing gold. It also helps boost the dollar, further weighing on bullion.

Fitch Solutions said in a note it had a neutral outlook on gold for the coming months with the precious metal easing in 2022.

"The Fed's normalisation of monetary policy, a strong global economic growth outlook and the temporary strengthening of the U.S. dollar should put a lid on gold prices," Fitch said.

Silver fell 0.1% to $22.91 per ounce, after hitting its lowest in more than a month on Thursday.

Platinum rose 0.9% to $941.31, while palladium dipped 1.8% to $1,997.08.