By Jan Harvey
LONDON - Gold edged lower on Friday as the dollar ticked up against the euro ahead of hotly anticipated U.S. non-farm payrolls data later, which will be closely watched for clues on the outlook for U.S. interest rates.
The dollar rose 0.2 percent against the single currency in early trade, though it remained on track for a seventh straight weekly loss. Its early signs of strength pressured gold, which is priced in the U.S. unit.
Spot gold was down 0.3 percent at $1,345.22 an ounce at 1030 GMT, while U.S. gold futures for June delivery were flat at $1,353.10 an ounce.
The payrolls data due at 1330 GMT is expected to show that the United States added 180,000 jobs in January, an increase from 148,000 the month before.
Stronger than expected numbers could shore up expectations for the Federal Reserve to press ahead with interest rates hikes this year, increasing the opportunity cost of holding non-yielding bullion.
"If we have any news that makes it more (likely) that we have more and faster rate hikes in the United States, of course it will be negative for the price," Frank Schallenberger, head of commodities research at LBBW, said.
"If we have very strong data from the U.S. and signs that the economy is even stronger than everyone thinks, it will be bad for gold in the short term, but what counts is the long term. I think fundamentals are very strong at the moment, and $1,350 is not the end."
The Fed held interest rates unchanged after its latest policy meeting this week but raised its inflation outlook and flagged "further gradual" rate increases.
Gold is set to end this week little changed, after rising in six out of the last seven weeks and hitting its highest in 17 months last week at $1,366.07.
On the wider markets, world stocks were set to post their biggest weekly drop since late 2016 as talk of central bank policy tightening and expectations of higher inflation boosted borrowing costs globally.
Holding gold offers a degree of insurance if the broader market suffers a correction, ScotiaMocatta said in a monthly report this week. "Record-setting global equities may well start to wobble if inflation starts to pick up, or if bond yields/interest rates continue to rise," it said.
Silver was 0.7 percent lower at $17.11 an ounce, while platinum was down 1.4 percent at $991.60 and palladium was up 0.6 percent at $1,042.72.
After hitting record highs this month, palladium fell to its lowest since Dec. 18 at $1,013.72 on Thursday and is on track for its biggest weekly drop since early September, down 4.8 percent.
(Additional reporting by Nallur Sethuraman in Bengaluru; Editing by Alison Williams)