Gold prices retreated on Friday as the dollar rebounded, but were still on track for a third straight weekly gain after a recent rally driven by progress on a U.S. stimulus deal.

Spot gold dipped 0.3pc to $1,880.46 per ounce by 0724 GMT. For the week, it was up 2.3pc. U.S. gold futures fell 0.2pc to $1,886.30 per ounce.

"The U.S fiscal stimulus is more or less priced in...so traders are trying to lock in profit before the weekend," said Margaret Yang, a strategist at DailyFX.

U.S. Congressional lawmakers scrambled to pass a coronavirus aid package on Thursday with both parties saying that failure to reach an agreement was no longer an option.

While a stimulus deal could spur gold prices higher, a more sustained ascent would require signs of a significant pick-up in inflationary pressures, said FXTM market analyst Han Tan.

The U.S. dollar rose 0.1pc, just above a more than two-year trough, dimming gold's appeal to other currency holders.

A break above the $1,892 area with support from a dovish U.S Federal Reserve and a weaker dollar could signal further upside ahead with resistance at $1,910, Yang said.

Analysts also said gold would find support from the Fed's promise to continue its bond-buying programme until "substantial further progress" is seen in restoring full employment and hitting its 2pc inflation target.

"Given the rising inflation expectations, weakening dollar and lofty valuations in some risky assets, demand for safe-haven inflation hedges should remain supported next year, continuing to push gold towards our $2,300/toz target," Goldman Sachs said in a note.

Potentially escalating geo-political tensions, the United States is set to add dozens of Chinese companies to a trade blacklist on Friday, sources said.

Silver slipped 1.4pc to $25.70 an ounce, Platinum fell 0.7pc to $1,036.60 and palladium eased 0.1pc to $2,337.61 but was up 0.7pc for the week.