Gold eyes worst week in two months on US rate hike view

SINGAPORE (Reuters) - Gold held near its lowest in three weeks on Friday and looked set to post its worst week in two months on expectations that the Federal Reserve would raise U.S. rates this year.

FUNDAMENTALS

* Spot gold was steady at $1,146.26 an ounce by 0032 GMT, not far from a three-week low of $1,144.20 in the previous session.

* Bullion is down 1.4 percent for the week, the sharpest decline since the week ended Aug. 28.

* The metal has been under pressure after the Fed on Wednesday surprised with a direct reference to its next policy meeting as a possibility for the first U.S. rate hike in nearly a decade.

* The Fed said raising rates at its next meeting would depend on progress made on employment and inflation, and omitted any reference to global developments affecting U.S. economic activity.

* Gold had rallied earlier this month on speculation that the softness in the global economy could prompt the U.S. central bank to delay the rate hike to next year. The hawkish tone on Wednesday triggered a sell-off in the metal.

* The strength in the dollar also hurt gold. The greenback climbed to a 2-1/2-month high on Wednesday after the Fed, though it has since given back some of those gains. [USD/]

* Investors will be watching the Bank of Japan's monetary policy decision due later in the day for trading cues. The BOJ is expected to hold monetary policy steady even while diluting its rosy inflation forecasts, sources say.

* For the top stories on metals and other news, click [TOP/MTL] or [GOL]

MARKET NEWS

* Stock markets around the world fell and bond yields rose as investors weighed the implications that a U.S. interest rate rise before the end of the year would have for the global economy and markets. [MKTS/GLOB]

DATA AHEAD (GMT)

0700 Germany Retail sales Sep

0745 France Consumer spending Sep

1000 Euro zone Inflation Oct

1000 Euro zone Unemployment rate Sep

1230 U.S. Personal consumption Sep

1230 U.S. Employment wages Q3

1345 U.S. Chicago PMI Oct

PRICES AT 0032 GMT

Metal Last Change Pct chg

Spot gold 1146.26 0.75 0.07

Spot silver 15.61 0.05 0.32

Spot platinum 985.49 -4.01 -0.41

Spot palladium 669.5 1.5 0.22

Comex gold 1146.2 -1.1 -0.1

Comex silver 15.605 0.055 0.35

COMEX gold and silver contracts show the

most active months

(Reporting by A. Ananthalakshmi; Editing by Joseph Radford)