Gold rises above $1,170, but set for weekly drop

By A. Ananthalakshmi

SINGAPORE (Reuters) - Gold edged higher from its lowest in over a week on Friday as the dollar gave back some of its overnight gains, but the metal was poised to snap two straight weekly gains on a boost to expectations for a U.S. rate rise this year.

Spot gold rose 0.6 percent to $1,173.16 an ounce by 0702 GMT. It fell as low as $1,162.50 in the previous session, the lowest level since Oct. 13.

For the week, the metal is down 0.3 percent, after posting two straight weekly gains. U.S. gold futures eased about 1 percent for the week, the biggest loss in six weeks.

The dollar climbed to its highest in nearly a month on Thursday against a basket of major currencies, but dropped 0.1 percent on Friday.

Upbeat U.S. housing and labour market data, and stronger equity markets, however, capped gains in gold.

"The general expectation is for the Fed to raise rates next year, but in recent days we have seen some robust data from the U.S. and cannot completely rule out a December rate hike," said a trader in Hong Kong.

Some long positions have been liquidated since the metal failed to hold above $1,190 an ounce, he said.

Bullion has been hurt by uncertainty over the timing of the first U.S. rate hike in nearly a decade. Investors believe higher rates could hurt demand for non-interest-paying gold.

Rate rise expectations have largely been pushed out to next year over concerns about the health of the global economy, but recent U.S. data has been strong.

U.S. home resales rebounded strongly in September and new applications for unemployment benefits hovered around 42-year lows last week, data on Thursday showed.

Bullion wasn't seeing much support from the physical markets. Festive demand for gold in India, the second biggest consumer, got off to a tepid start, with local prices heavily discounted to the global benchmark.

Demand in top consumer China was also lacklustre, dealers said, while premiums in Hong Kong dropped.

(Reporting by A. Ananthalakshmi; Editing by Richard Pullin and Subhranshu Sahu)