* Gold up 0.7 pct this week despite easing on Friday
* Focus still on September Fed meeting
* GRAPHIC-2016 asset returns: reut.rs/1WAiOSC
(Updates prices, adds comment)
By Jan Harvey
LONDON, Sept 9 Gold slipped for a third day as
buyers cashed in on a recent rally to near three-week highs, but
it stayed on track for a second successive weekly gain driven by
fading expectations of an imminent hike in U.S. interest rates.
The metal is up 0.7 percent so far this week, holding on to
nearly half the sharp gains it made on Tuesday after downbeat
U.S. data fuelled talk that the Federal Reserve will hold off
raising rates at its September policy meeting.
Spot gold was down 0.25 percent at $1,334.60 an ounce
at 1152 GMT on Friday, while U.S. gold futures for
December delivery were $3.40 lower at $1,338.20. Gold peaked at
$1,352.65 an ounce after rallying 1.8 percent on Tuesday.
"Tuesday's rally was to be expected in light of the weak
numbers out of the U.S., but the current more subdued tone, not
so much," Capital Economics analyst Simona Gambarini said.
"There is... maybe some profit-taking among some people who
got in $30 lower. (Now) it's all about the Fed meeting in a
couple of weeks. That's what investors are looking at."
Expectations that the Fed would stand pat on interest rates
after hiking for the first time in nearly a decade in December
have helped push gold 26 percent higher this year.
Gold is highly sensitive to rising U.S. interest rates, as
these increase the opportunity cost of holding non-yielding
bullion, while boosting the dollar, in which it is priced.
Markets remain uncertain over the outlook for rates,
allowing the dollar to claw back some ground it lost against the
euro after a European Central Bank statement on Thursday. It
remained lower, however.
The ECB kept the door open to more stimulus but gave few
hints about its next move, disappointing those who had priced in
a dovish tone. The euro bounced in response, though gold prices
shrugged off dollar weakness to fall.
"The ECB's decision to leave policy unchanged may have
refocused market participants on the possibility that the Fed
sends a hawkish signal in the coming days before its pre-meeting
quiet period begins next Tuesday," BNP Paribas said in a note.
Holdings of the world's largest gold-backed exchange-traded
fund, SPDR Gold Shares, fell 0.13 percent to 950.62 tonnes
Gold demand in Asia remained subdued this week as higher
prices kept buyers at bay, but upcoming festivals following a
good monsoon in India may stimulate demand, analysts said.
Silver was down 0.7 percent at $19.45 an ounce, while
platinum was 0.3 percent lower at $1,079.50 an ounce. It
was however on track for its first weekly gain in six, up 1.7
Palladium was down 0.1 percent at $681.55.
(Additional reporting by Nallur Sethuraman in Bengaluru;
Editing by Susan Thomas and Alexander Smith)