Gold steadies as US data curbs rate hike speculation

London - Gold steadied above two-week lows on Friday after downbeat US data curbed already muted expectations for a US rate rise next week but uncertainty over monetary policy kept the metal on track for its first weekly loss in three.

The CME Group's FedWatch tool showed futures traders are now pricing in a 12% chance of a rate rise this month; down from 15% on Wednesday, after soft US retail sales and manufacturing output data.

That kept a lid on the dollar, which was little changed on the week on Friday, and underpinned gold after its 1 percent slide this week.

Spot gold was at $1 314.33 an ounce at 09:30 GMT, little changed from $1 313.80 late on Thursday, a session when it hit its lowest since September 2 at $1 309.25. US gold futures for December delivery were down 10 cents at $1 317.90.

"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 US and Japanese central banks are both holding monetary policy meetings on September 20 to 21.

Gold is highly sensitive to rising US 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 Reuter’s poll of 100 economists showed a median 70% chance of an increase in December.

That could weigh still on gold, which has rallied 24% 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 also little changed at $18.93 an ounce.