BENGALURU (Reuters) - Gold prices fell on Friday and were headed for a fifth straight weekly decline, weighed down by a stronger U.S. dollar and expectations of a Federal Reserve rate hike next week.
Spot gold was down 0.3 percent at $1,167.11 an ounce by 0245 GMT, and was set for a weekly decline of about 0.8 percent.
U.S. gold futures shed 0.2 percent to $1,169.60 per ounce.
"Because of a stronger dollar and prospects of another rate hike, gold prices are hovering around these levels," said Barnabas Gan, an analyst at OCBC Bank in Singapore.
"$1,150 is a quite strong support. If there persists strong growth prospects into 2017 due to higher oil prices ... gold prices may trend lower towards the end of the year."
The dollar held large gains against the yen and euro early on Friday.
"We see gold resuming its downtrend, especially heading into next week's Fed meeting," INTL FCStone analyst Edward Meir said in a note.
"Although a rate increase is very much discounted, we suspect the markets will still be rather nervous about policy wording and on any hint the Fed could give about future rate increases."
The Fed is expected to hike rates at its policy meeting next Tuesday and Wednesday.
Interest rates futures, implied traders saw a 98 percent chance the Fed would raise interest rates by a quarter point next week, and about a 50 percent chance it would raise rates by at least another quarter point by June 2017, according to CME Group's FedWatch program.
Expectations of further U.S. interest rate increases lower demand for the non-interest-paying bullion.
The number of Americans filing for unemployment benefits fell from a five-month high last week, pointing to labour strength that underscores the economy's sustained momentum and reinforcing the case for a Federal Reserve rate increase.
Rising bond yields and a flight to stock markets have also dampened the appeal of gold.
U.S. Treasury yields rose on Thursday in line with their European counterparts after the European Central Bank prolonged its bond purchase programme, as expected, but stunned traders by scaling back on the amount of bonds it will buy each month.
Asian shares flatlined on Friday but were on track for robust weekly gains.
Holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.34 percent to 860.71 tonnes on Thursday. SPDR holdings have fallen nearly 9 percent since November and are on track for a fifth straight week of losses.
Elsewhere, silver was down 0.4 percent at $16.94 an ounce and platinum fell 0.9 percent at $930.10.
Palladium slipped 0.2 percent to $734, after reaching its lowest since Nov. 18 in the previous session.
(Reporting by Swati Verma and Nallur Sethuraman in Bengaluru; Editing by Joseph Radford and Richard Pullin)