Gold stuck near 7-1/2 month low; set for worst week since May

SINGAPORE (Reuters) - Gold extended losses to trade near a 7-1/2 month low on Friday, poised to post its worst week in more than three months as a stronger dollar and easing tensions in Ukraine curbed appetite for safe-haven bullion.

FUNDAMENTALS

Spot gold had slipped 0.2 percent to $1,238.36 an ounce by 0031 GMT, not too far from Thursday's trough of $1,234.71 - also the metal's lowest since late January.

Gold is down 2.4 percent for the week, its biggest weekly drop since the week ended May 30.

Bullion's weakness in recent days has largely been due to the stronger dollar, which is being boosted by strong economic data and expectations that the U.S. Federal Reserve will soon raise interest rates.

The dollar index saw small losses on Thursday as data showed more Americans tapping unemployment benefits, but it was firmly on track to post its ninth consecutive week of gains.

Safe-haven bids for gold were also lower after Ukraine's president said that Russia had removed the bulk of its forces from his country, raising hopes for a peace drive now underway after five months of conflict in which more than 3,000 people have been killed.

SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.32 tonnes to 788.40 tonnes on Thursday.

CME Group Inc will launch a physically deliverable gold futures contract in Hong Kong later this year to capture growing hedging and investment buying in the Asian region.

ICE Futures U.S. said it will reduce contract size and increase purity in its Mini Gold futures and options, its latest attempt to boost trading volume by appealing to retail investors.

South Africa-focused bullion producer Sibanye Gold plans to cut up to 2,500 workers at its recently acquired Cooke 4 mine west of Johannesburg, two industry sources told Reuters on Thursday.

Among other precious metals, silver held sharp overnight losses to trade near a 14-month low. It was headed for a loss for the eighth week out of nine.

Platinum group metals were hit by profit-taking and weakness in gold prices. Platinum, trading near its lowest since February, was poised for its worst week since April.

With a 6-percent drop, palladium was the worst performing precious metal of the week. The decline marks the metal's biggest weekly loss since June 2013.

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