By Naveen Thukral
SINGAPORE (Reuters) - Gold edged up on Friday with the market on track to end the week on a firmer note as the dollar hovered near its lowest in five months, pressured by the Federal Reserve's plan to make fewer-than-expected interest rate hikes.
Spot gold gained around half a percent to $1,263.30 an ounce by 0711 GMT, while U.S. gold was little changed at $1,264.30 an ounce. Spot gold has risen more than 1 percent this week after closing down 0.9 percent in the previous week.
"This is reminiscent of market reacting to FOMC statement," said Daniel Ang, analyst at Phillip Futures in Singapore. "Gold is finding support at $1,260, it is reluctant to go below that level and it is mainly due to weaker U.S. dollar."
The dollar held near a 17-month low struck overnight against the yen on Friday as the Federal Reserve's less hawkish outlook for U.S. interest rates weighed on the U.S. currency. The dollar index was set to end the week 1.5 percent lower.
The U.S. central bank held interest rates steady and indicated it would tighten policy this year, but fresh projections showed policymakers expect two quarter-point increases by year-end, half the number forecast in December.
Expectations the Fed would raise rates steadily this year had faded since the bank's initial hike in December, as concerns over global growth roiled financial markets.
Rising rates tend to pressure gold by lifting the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.
SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings rose 1.50 percent to 807.09 tonnes on Thursday from 795.20 tonnes on Wednesday.
Silver rose more than 1 percent to its highest since late October. The market is up almost 4 percent this week, after ending marginally down last week.
(Reporting by Naveen Thukral; Editing by Himani Sarkar)
