Gold down from 7-week high on dollar strength, technical swing

By Sethuraman N R

(Reuters) - Gold fell on Friday after hitting a seven-week peak in the previous session as the dollar edged up and a technical correction set in, but it was still set to end higher for a third straight week.

Spot gold had dropped 0.2 percent to $1,193.66 per ounce by 0603 GMT. It touched its strongest since Nov. 23 at $1,206.98 on Thursday.

U.S. gold futures eased 0.5 percent to $1,193.80 per ounce.

"Currently we see that gold is overbought and needs some technical correction," said Jiang Shu, chief analyst at Shandong Gold Group.

He added that prices could fall towards $1,170 an ounce before climbing above $1,210, although they may decline again in the run up to a March meeting of the U.S Federal Reserve.

Reuters technical analyst Wang Tao said spot gold faced a strong resistance zone of $1,205-$1,210 per ounce, and may retrace steps back towards support at $1,172.

The dollar index, which measures the greenback against a basket of currencies, rose 0.1 percent to 101.440.

Fed Chair Janet Yellen did not comment on the outlook for the U.S. economy or monetary policy in remarks to teachers this week.

However, several Fed officials on Thursday cautioned that the fiscal and tax plans sketched out by the incoming Trump administration could spur a short-term economic boost that would result in longer-run inflation and debt problems.

The statements by Fed officials could imply tighter U.S. monetary policies and were bearish for gold, said HSBC analyst James Steel.

Trump's campaign calls for tax cuts and more infrastructure spending have boosted U.S. shares and the dollar, as well as driving a sell-off in Treasuries, but his protectionist statements and a flurry of off-the-cuff posts on Twitter have kept many investors from adding to risky positions.

Among other precious metals, spot silver fell 0.3 percent at $16.65, after hitting a near one-month high of $16.92 in the previous session.

Platinum dropped 0.3 percent to $969.25. It touched a 2-month high of $990.10 in the prior session.

Palladium declined 0.7 percent to $751.58.

(Reporting by Nallur Sethuraman in Bengaluru; Editing by Kenneth Maxwell and Joseph Radford)