Dec 20 (Reuters) - Gold prices gained on Friday as the dollar pulled back from highs ahead of U.S. Personal Consumption Expenditure data due later in the day, although the Federal Reserve's hawkish interest rate outlook set bullion on track for a weekly loss.
Spot gold was up 0.3% at $2,602.51 per ounce, as of 1201 GMT, and U.S. gold futures nudged 0.4% higher to $2,617.80.
Bullion has fallen about 1.8% this week so far, after the U.S. central bank on Wednesday projected two 25-bps rate cuts by the end of 2025, which is half a percentage point less in policy easing than officials had expected in September.
"The recent correction in the gold market is related to the Fed meeting, where more hawkish sentiments were voiced than expected," said Julia Khandoshko, CEO at European broker Mind Money.
Higher interest rates increase the opportunity cost of holding gold, which does not yield any interest.
"If the Fed only delivers two rate cuts in 2025, we would likely need to moderate our expectations for gold demand from exchange-traded funds (ETFs), which could reduce the upside we still expect in bullion prices," UBS said in a note.
U.S. data on Thursday showed stronger-than-expected third quarter growth and a drop in jobless claims, further bolstering expectations of gradual Fed policy easing.
The market is now awaiting the core PCE data, the Fed's preferred inflation gauge, due at 1330 GMT, for further insights into the U.S. economy's condition.
Gold started 2024 at $2,000 per ounce and is on track to end the year about 25% higher. Khandoshko said this made the $3,000 level achievable in only a matter of time.
Elsewhere, spot silver fell 0.6% to $28.85 per ounce and was headed for its worst week since December 2023.
Platinum rose 0.6% to $928.60 and palladium gained 0.6% to $908.40.
Reporting by Daksh Grover in Bengaluru, additional reporting by Swati Verma; Editing by Mohammed Safi Shamsi and Kevin Liffey
