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Gold inched lower on Friday after a rise in U.S. inflation in March buoyed the dollar and reinforced bets for an interest rate hike next week, but banking sector concerns kept bullion on course for a small monthly rise.

Spot gold edged 0.2% lower to $1,984.09 per ounce by 9:05 a.m. EDT (1305 GMT), but was up 0.8% for the month. U.S. gold futures eased 0.3% to $1,993.20.

The U.S. core personal consumption expenditures (PCE) index, the Federal Reserve's preferred inflation gauge, rose 0.3% in March, the same as in February and in line with market expectations, with traders adding to bets for a rate hike next week.

Elevated rates dull zero-yielding bullion's appeal.

Gold seemed to largely ignore the last key piece of data ahead of next week's meeting, but "a 25 bps hike next week is now certain though it remains in question whether the Fed will signal a pause," said Tai Wong, an independent metals trader based in New York.

"Gold seems likely to remain in its tight recent range for now though a weekly close under $1,965 could trigger further losses while bulls would welcome a push back above $2,000."

The dollar held gains after the inflation data, but was headed for a monthly decline. A weaker dollar makes bullion cheaper for overseas buyers. [USD/]

But "a sudden deterioration in the bank sector crisis could trigger a rush to safe-havens likely to see gold prices soar above previous records," said Ricardo Evangelista, senior analyst at ActivTrades.

Gold scaled a one-year peak of $2,048.71 in mid-April as the banking crisis unfolded.

Also on the radar were developments surrounding the U.S. debt ceiling.

Silver fell 0.4% to $24.85 per ounce, platinum shed 0.8% to $1,068.46, while palladium rose 0.1% to $1,496.79 -- all headed for second monthly rises.