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 Gold prices hemmed into a tight range on Friday in thin trading, as cautious traders awaited economic data due later in the day to gauge the Federal Reserve's rate hike stance.

Spot gold was up 0.2% to $1,796.43 per ounce as of 0739 GMT. U.S. gold futures rose 0.5% to $1,804.40.

Investors' attention turns to personal consumption expenditure (PCE) data due at 1330 GMT, for cues on inflation.

"Gold will get a boost if the data indicates that inflation has reined a little, which might raise expectations of the Fed slowing down on rate hikes," said Brian Lan, managing director at Singapore-based dealer GoldSilver Central.

Bullion prices dropped more than 1% on Thursday after U.S. economic data highlighted the country's economy rebounded faster than previously estimated, boosting the dollar and potentially setting the Fed on a keener path to fight inflation.

Meanwhile, new claims for unemployment benefits rose less than expected last week in the United States, data on Thursday showed.

"The market is in a digestion tone after yesterday's data. We saw a strong move to a news that was not especially dramatic because of low liquidity in the market before the Christmas holiday," said Ilya Spivak, head of global macro at Tastytlive.

Higher rates diminish gold's anti-inflationary appeal and increase the opportunity cost of holding bullion since it pays no interest.

I think gold prices will be less volatile next year and expect to resume an upward trend with recession likely in the picture, Lan added.

Market participants also kept a close tab on rising COVID-19 infections in top gold consumer China that could have an impact physical buying. [GOL/AS]

Spot silver rose 0.7% to $23.73 per ounce.

Platinum gained 1.3% to $989.63 and palladium rose 0.2% to $1,684.13, but both the metals were headed for their secondly straight weekly fall.