 "Gold set to finish week near five-year lows, stronger dollar looms")
Spot gold firmed on Friday but was still set to finish the week trapped near its cheapest in more than five years as the metal struggles against a stronger dollar ahead of a widely expected US rate rise next month.
"We're still negative and target $985 in the short run," said analyst Dominic Schnider of UBS Wealth Management in Hong Kong. "The rationale is fairly clear. The Fed is going to hike, the dollar is going to see further strength and in that environment it's going to be fairly difficult to sustain current prices."
A stronger dollar hurts demand for commodities priced in the greenback by making them costly for holders of other currencies.
Spot gold had edged up by 0.4% to $1,085.80 an ounce by 0609 GMT. Prices hit the weakest in more than five years at $1,064.95 an ounce on Wednesday and are set to close the week little changed.
US gold rose 0.7% to $1,086 an ounce.
New US applications for unemployment benefits fell last week while a gauge of US economic activity rebounded in October, signs of a healthy economy that could give the Federal Reserve confidence to raise interest rates next month.
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The dollar steadied on Friday after a recent rally that took the greenback to 7-month highs against a basket of peers.
Gold could come under further pressure from news that Chinese banks were turning more cautious on gold lending.
Chinese banks are growing alarmed by a rising number of defaults among jewellery manufacturers, prompting them to review new gold lending more carefully, according to sources with direct knowledge of the issue.
The top four Chinese banks alone have up to 443.4 billion yuan ($69.63 billion) tied up in gold leasing, so any pull back could cut China's imports and hit global bullion prices.
There is, however, evidence of some bargain hunting that may help slow the pace of gold's fall, a trader in Singapore said.
"For gold it's all about dollar strength. Looks like gold borrowing rate is getting a bit tighter with physical demand."