* Gold down 1.1 pct this week, snapping two weeks of gains
* Biggest gold ETF holdings drop 3.3 tonnes on Thursday
* GRAPHIC-2016 asset returns: reut.rs/1WAiOSC
By Jan Harvey
LONDON, Sept 16 Gold steadied above two-week
lows on Friday after downbeat U.S. data curbed already muted
expectations for a U.S. rate rise next week, though a firmer
dollar and uncertainty over monetary policy kept it on track for
its first weekly loss in three.
The CME Group's FedWatch tool showed futures traders are now
pricing in a 12 percent chance of a rate rise this month, down
from 15 percent on Wednesday, after soft U.S. retail sales and
manufacturing output data.
That underpinned gold after its 1 percent slide this week.
Spot gold was at $1,313.66 an ounce at 1135 GMT,
little changed from $1,313.80 late on Thursday, a session when
it hit its lowest since Sept. 2 at $1,309.25. U.S. gold futures
for December delivery were down $1 at $1,317.00.
"Gold didn't get much of a bounce yesterday from the retail
sales data, which is somewhat surprising," Mitsubishi analyst
Jonathan Butler said. "But if we look at what's happening
elsewhere, oil's been down this week, equities are holding onto
the some of their gains, and those things present something of a
headwind to gold."
"Things are largely on hold ahead of the Fed and Bank of
Japan meetings next week," he said.
The U.S. and Japanese central banks are both holding
monetary policy meetings on Sept. 20-21.
Gold is highly sensitive to rising U.S. interest rates,
which increase the opportunity cost of holding non-yielding
bullion, while boosting the dollar, in which it is priced.
While expectations for a September rate rise have faded, a
new Reuters poll of 100 economists showed a median 70 percent
chance of an increase in December.
That could weigh still on gold, which has rallied 24 percent
this year on expectations that the Federal Reserve would hold
off on further interest rate rises.
Investment appetite for the precious metal was soft, with
holdings of the world's largest gold-backed exchange-traded
fund, SPDR Gold Shares, falling 3.3 tonnes on Thursday.
Demand for gold in India remained lacklustre this week as
higher prices hampered consumer purchases, though discounts
narrowed due to a correction in the spot rate.
Silver was down 0.1 percent at $18.88 an ounce.
Platinum was 1 percent lower at $1,021.01 after
falling to 2-1/2-month lows earlier at $1,012. The white metal
used in jewellery and autocatalysts is set for a seventh
straight weekly loss for the first time since 2013.
Palladium was down 0.2 percent at $653.90 an ounce.
(Additional reporting by Swati Verma and Nallur Sethuraman in
Bengaluru; editing by David Clarke and William Hardy)