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 Gold hit a more than three-week high on Friday and was bound for a weekly rise, supported by a softer dollar and bets that the Federal Reserve may cool the pace of rate hikes as economic risks deepen.

Spot gold rose 0.3% to $1,761.05 per ounce by 1040 GMT, and has gained about 2% this week.

U.S. gold futures gained 0.4% to $1,776.20.

"Gold is drawing strength from a softer dollar and cooling Fed hike bets," said FXTM analyst Lukman Otunuga, adding soft economic data could keep bolstering gold.

The U.S. economy contracted in the second quarter, driving an over 1% gain in safe-haven gold on Thursday.

Should Friday's U.S. PCE data suggest signs of inflation peaking, this could be a welcome development for gold, while "a red hot report is likely to feed the inflation beast – dragging gold lower in the process as market players boost rate hike bets," Otunuga added.

Gold remains inversely correlated to the dollar and yields, rather than being a gold story in itself, OANDA senior analyst Jeffrey Halley said.

Higher rates increase the opportunity cost of holding non-yielding gold. [US/]

The dollar index eased 0.4%, making gold less expensive for overseas buyers. [USD/]

But the dollar's recent overall strength kept bullion en route to a fourth consecutive monthly drop.

"Although bullion saw a sell-off below $1,700 (earlier this month), it is significant that long-term support at $1,675/80 was tested and held. Gold has been trying to form a bottom since," Halley said.

In physical markets, gold buying eased in India as domestic prices rose, while the likelihood of fresh COVID restrictions clouded the demand outlook for China. [GOL/AS]

Spot silver rose 0.2% to $20.02 per ounce, while platinum jumped 0.8% to $895.57.

Palladium was flat at $2,078.95.