PRECIOUS-Gold eyes biggest weekly drop in five on US data, Fed rate view – Reuters

* Gold down 2.7 pct for the week

* U.S. consumer spending up in July

* Silver set for third worst week this year

(Updates prices, adds comment)

By Clara Denina

LONDON, Aug 28 (Reuters) – Gold edged up on Friday but was
still on track to post its biggest weekly drop in five as the
dollar steadied and U.S. economic data supported the case for a
near-term increase in interest rates.

Spot gold was up 0.4 percent at $1,130.60 an ounce by
1333 GMT, but still down nearly 3 percent for the week so far.

U.S. gold for December delivery firmed 0.3 percent
to $1,125.70 an ounce.

The metal touched a one-week low of $1,117.35 on Wednesday
and has lost more than 3 percent since hitting a seven-week top
on Aug. 21, failing to benefit from the dollar falling to a
seven-month trough this week.

“It has a detrimental impact on investor confidence that
gold doesn’t sustain rallies and it seems to get locked into
trading ranges but it has to be remembered nevertheless that
although gold has corrected lower on the firmer dollar, it has
done well compared to other commodities,” broker Sharps Pixley
CEO Ross Norman said.

The dollar rose 0.2 percent against a basket of leading
currencies, while European equities eased back, following an 8
percent correction earlier this week.

Data on Friday showed U.S. consumer spending picked up a bit
in July, offering further evidence of strength in the economy
that could keep the door open to a Federal Reserve interest rate
rise this year.

This followed Thursday’s upward revision in U.S. economic
growth in the second quarter to 3.7 percent from the initial
estimate of 2.3 percent.

A rate rise would dim the appeal of non-interest bearing
assets as gold.

“The big question for next week is whether the anxiety that
crept into the market on Aug. 10 when China devalued its
currency is going to continue,” Saxo Bank senior manager Ole
Hansen said.

“We are only a few weeks away from the Fed policy meeting
and that is going to attract a lot of attention as well.”

The market was also assessing comments on policy
normalisation from Fed officials attending the Aug. 27-29
Jackson Hole Economic Symposium.

Two top Federal Reserve officials who have pressed for
interest rate increases said on Friday that a spate of violent
swings in financial markets won’t knock the U.S. economy off its

Weak gold prices have failed to spur physical demand in
Asia, with premiums in India slipping, and those in China still
hooked on volatile equities.

Spot silver was unchanged at $14.48 an ounce, having
fallen to a six-year trough of $13.93 on Wednesday. Silver has
dropped more than 5 percent this week, its steepest such decline
since February.

Palladium rose 2.8 percent to $575 an ounce,
extending Thursday’s 5 percent rebound from five-year lows,
while platinum was up 0.5 percent at $1005.50.

(Additional reporting by Manolo Serapio Jr in Manila; Editing
by Susan Thomas and David Evans)