By Swati Verma
BENGALURU (Reuters) - Gold edged lower on Friday, backing off the two week high struck in the previous session as the dollar stayed firm, but the yellow metal was still on track for its biggest weekly gain in nearly two months.
Spot gold was slightly down 0.2 percent to $1,334.71 an ounce by 0732 GMT, but was set for a weekly gain of nearly 2 percent, the highest since end-July.
U.S. gold futures slipped 0.4 percent to $1,339 an ounce.
"Gold's move could be closely tied to the dollar. We expect gold to be mostly range-bound for the next few weeks," said Ronald Leung, chief dealer, Lee Cheong Gold Dealers in Hong Kong.
"People will try to push up the prices between now and the next U.S. Federal Reserve meeting. We don't think the Fed would act before the presidential elections in November."
The dollar index held steady at 95.451.
A stronger greenback makes dollar-denominated gold more expensive for holders of other currencies.
"The ongoing strength in the global equity markets and some signs of stabilization in the dollar could both start chipping away at gold's underlying strength," INTL FCStone analyst Edward Meir said in a note.
Asian shares held near 14-month highs on Friday as investors restored bets the Federal Reserve is settling into a phase of very gradual interest rate rises, while Japanese bond yields fell after the Bank of Japan's radical new policy scheme.
"Gold could come under pressure quickly if market opinion shifts more decisively in favor of a December rate hike. Also, the long-run expectation is that the Fed will eventually raise rates, which may stem gold gains," said HSBC analyst James Steel.
Spot gold may stabilise around a support at $1,335 per ounce, and then retest a resistance at $1,343, as indicated by its wave pattern and a Fibonacci projection analysis, according to Reuters technical analyst Wang Tao.
Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.69 percent to 950.92 tonnes, for a second straight session on Thursday.
Silver fell 0.3 percent to $19.79. Among the precious metals, silver had the best week so far. It rose 5 percent, its highest since the week ending July 1.
Platinum edged up 0.6 percent at $1,058.50. It rose as much as 1.7 percent in the previous session. Palladium was down 0.2 percent at $691.50, after rising 1.5 percent on Thursday.
(Reporting by Swati Verma and Nallur Sethuraman in Bengaluru; Editing by Simon Cameron-Moore and Sherry Jacob-Phillips)
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