Gold extends losses on stronger dollar, possible Fed rate hike

(Reuters) - Gold extended losses on Friday, weighed down by a stronger U.S. dollar and expectations the U.S. Federal Reserve will hike rates next week.

FUNDAMENTALS

* Spot gold was down 0.3 percent at $1,167.40 an ounce by 0054 GMT, on track for a fifth consecutive weekly decline.

* U.S. gold futures shed 0.2 percent to $1,169.60 per ounce.

* The dollar held large gains against the yen and euro early on Friday.

* The Fed is expected to hike rates at its policy meeting next Tuesday and Wednesday, a move seen as negative for gold, as higher U.S. rates lift the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.

* The number of Americans filing for unemployment benefits fell from a five-month high last week, pointing to labour strength that underscores the economy's sustained momentum.

* U.S. Treasury yields rose on Thursday in line with their European counterparts after the European Central Bank prolonged its bond purchase programme, as expected, but stunned traders by scaling back on the amount of bonds it will buy each month.

* The European Central Bank trimmed back its asset buys in a surprise move on Thursday but promised protracted stimulus to aid a still fragile recovery, and dismissed any talk of tapering the programme away.

* China's imports grew at the fastest pace in more than two years in November, fueled by its strong thirst for commodities from coal to iron ore, while exports also rose unexpectedly, reflecting a pick-up in both domestic and global demand.

* South Africa's mining output fell 2.9 percent year-on-year in October, according to the Statistics South Africa's monthly mining production data released on Thursday.

* Holdings of the SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, fell 0.34 percent to 860.71 tonnes on Thursday.

(Reporting by Swati Verma in Bengaluru; Editing by Joseph Radford)