Gold steadies as market awaits U.S. GDP data

By Zandi Shabalala

LONDON (Reuters) - Gold steadied on Friday after a week of lacklustre trading as the market awaits a possible steer on U.S. interest rates from U.S. third-quarter GDP data expected later in the day.

Spot gold was little changed at $1,266.42 an ounce at 1136 GMT while U.S. gold futures slipped 0.2 percent to $1,267.10.

A strong GDP reading for the world's biggest economy would strengthen the case for a rate increase this year, making non-yielding assets such as gold less attractive while boosting the dollar and U.S. treasuries.

"We think it's going to be relatively strong (GDP) data. Good news for the U.S economy will see some downward pressure on gold," said ETF Securities commodity strategist Martin Arnold.

"In the near term that makes a bullish dollar so in the weeks leading up to elections and Fed meeting in December gold could be under significant pressure."

The dollar index, which measures the greenback against a basket of currencies, was barely changed and trading near nine-month highs at 98.793. [USD/]

U.S. interest rate futures are implying a more than 78 percent chance of the U.S. Federal Reserve raising rates by December, according to the CME Group's FedWatch tool.

Bullion markets may have largely absorbed the impact of a rate rise and moderately higher yields will not necessarily weigh on prices, provided that the dollar does not rally further, HSBC analyst James Steel said in a note.

Meanwhile, physical demand from emerging markets is coming back and should support higher prices, Steel said.

Demand for bullion in India is expected to pick up during the Dhanteras and Diwali festivals, when gold is traditionally given as a gift.

In other precious metals, silver was flat at $17.60 an ounce and platinum gained 0.5 percent to $967.60.

Silver was on track for its biggest weekly gain in five while platinum was heading towards its best week in three months.

A Reuters poll on Friday showed that platinum prices are set to rise next year to their highest since 2014 on an average basis but will remain at a discount to gold.

Palladium rose 1.3 percent to $618, having earlier touched a 16-week low of $608.47.

(Additional reporting by Apeksha Nair and Vijaykumar Vedala; editing by David Goodman and Jason Neely)