Gold hits 3-week low as dollar firms

By Nithin ThomasPrasad

BENGALURU (Reuters) - Gold prices hit a three-week low on Friday and were on track for a second weekly fall, dragged down as upbeat U.S. economic data supported the dollar.

The dollar index firmed after data showed the number of Americans filing for unemployment benefits fell more than expected last week.

Robust economic data could encourage the U.S. Federal Reserve to raise interest rates again this year following a hike this week.

"The strengthening of the dollar (is weighing on gold)... and after the latest Fed interest rate hike people are waiting to see when the Fed will raise rates next," said Brian Lan, managing director at gold dealer GoldSilver Central in Singapore.

Higher interest rates tend to boost the dollar, putting pressure on gold prices by increasing the opportunity cost of holding non-yielding bullion.

Spot gold remained unchanged at $1,253.50 per ounce, as of 0758 GMT. Earlier in the session, it hit $1,251.05, its weakest since May 24. The metal has fallen about 1 percent so far this week.

U.S. gold futures for August delivery rose 0.1 percent to $1,256.4.

"The fact that the dollar is nudging higher, should continue to pressure the market, while the churn in U.S. equities is still not serious enough to warrant a flight to safety into the precious metal," said INTL FCStone analyst Edward Meir.

"We think gold will likely have another $20-$25 on the downside before encountering more serious support."

Meanwhile, holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund fell 0.14 percent to 853.68 tonnes on Thursday.

Among other precious metals, spot silver was headed for its biggest weekly decline in six weeks. The metal gained 0.5 percent at $16.84 per ounce, after hitting $16.64 in the previous session, its weakest since May 19.

"Price action in both gold and silver of late seems to imply that traders still have plenty of short-term long positioning on their books," said Jeffrey Halley, senior market analyst at OANDA.

"It may leave both metals vulnerable to a further washout into the weekend if the U.S. dollar strength persists."

Platinum slipped 0.2 percent to $917.60 per ounce. The metal had hit its lowest in more than one month on Thursday.

Meanwhile, palladium dropped 0.6 percent to $864.05 per ounce, as it moved towards its first weekly decline in four weeks.

(Additional reporting by Vijaykumar Vedala in Bengaluru; Editing by Joseph Radford and Sherry Jacob-Phillips)