Gold firms near $1,200 but poised for second weekly dip

SINGAPORE (Reuters) - Gold firmed around $1,200 an ounce on Friday but the metal was headed for its second straight weekly drop, weighed down by speculation over the timing of an interest rate hike by the U.S. Federal Reserve.

FUNDAMENTALS

* Spot gold edged up 0.3 percent to $1,200.10 an ounce by 0040 GMT, after dropping 0.3 percent on Thursday. The metal is down 0.6 percent for the week.

* Investors are closely watching U.S. economic data to gauge when the Fed will begin to raise interest rates. Strong data could prompt the U.S. central bank to soon hike rates, a move that could dent demand for bullion.

* However, despite sluggish data and a softer dollar on Thursday, bullion logged in losses on mixed signals regarding the rate hike.

* Data on Thursday showed U.S. housing starts rose far less than expected in March and factory activity in the mid-Atlantic region grew modestly this month, suggesting the economy could struggle to rebound from a soft patch hit in the first quarter.

* There are expectations growth will rebound in the second quarter, but the lukewarm data suggest the momentum will probably not be strong enough for the Federal Reserve to start raising interest rates before September.

* Fed officials on Thursday were at public odds over when the U.S. central bank should start raising rates.

* Physical demand for gold has also been subdued with prices holding near the key $1,200 mark.

* Investors will be watching more U.S. data due later in the day and the dollar for trading cues.

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

MARKET NEWS

* The dollar wallowed at its lowest in over a week against a basket of major currencies early on Friday, having suffered yet another setback overnight in the hands of more underwhelming U.S. economic data. [USD/]

DATA/EVENTS (GMT)

0800 Euro zone Current account Feb

0900 Euro zone Consumer prices final Mar

1230 U.S. Consumer prices Mar

1400 U.S. Leading index Mar

1400 U.S. University of Michigan sentiment index Apr

PRICES AT 0040 GMT

Metal Last Change Pct chg

Spot gold 1200.1 2.95 0.25

Spot silver 16.33 0.08 0.49

Spot platinum 1161.7 5.35 0.46

Spot palladium 778.65 3.3 0.43

Comex gold 1200.1 2.1 0.18

Comex silver 16.295 0.011 0.07

Euro 1.0781

DXY 97.526

COMEX gold and silver contracts show the

most active months

(Reporting by A. Ananthalakshmi; Editing by Michael Perry)