Gold held steady on Friday amid lower trading activity because of Asian holidays but was set for its first weekly loss in three as investors were choosing more riskier assets such as equities rather than holding value in the yellow metal.
Equity markets were higher after weak U.S. data reduced the already low chance of an interest rate increase when the Federal Reserve meets next week. However, a new Reuters poll of 100 economists showed a median 70 percent chance of an increase in December.
Gold is highly sensitive to rising interest rates, which would lift the opportunity cost of holding non-yielding assets.
"We are expecting prices to be volatile especially with the Fed meeting next week. Investors will be analysing every single bit of data that is coming out," said Brian Lan, managing director at Singapore-based gold dealer GoldSilver Central.
The chances of an interest rate hike dropped after reports on Thursday showed U.S. retail sales fell more than expected in August and manufacturing output declined as well as rising jobless claims in the latest week.
Spot gold was steady at $1,313.90 an ounce by 0529 GMT. Bullion is on track to end the week down about 1 percent.
U.S. gold futures were little changed at $1,317.90 an ounce.
Spot gold is expected to revisit its Sept. 1 low of $1,301.91 per ounce, as it has broken a support at $1,319, according to Reuters technical analyst Wang Tao.
"Gold is just following the dollar market. That's the reason for the volatility," a Tokyo-based precious metals trader said.
"The market is mostly going to be short ahead of the Bank of Japan's (BOJ) meeting next week. If the BOJ is going for more easing then it might put pressure on gold in line with a strong U.S. dollar."
The U.S. and Japanese central banks are both holding their policy meetings on Sept. 20-21.
The Bank of Japan will conduct a comprehensive review of its stimulus program after failing to reach its 2 percent inflation target.
The dollar sagged early on Friday after the lacklustre U.S. economic data.
Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.35 percent to 932.23 tonnes on Thursday.
On Thursday, the Bank of England and the Swiss National Bank held interest rates steady.
Holidays in many Asian countries including China are expected to keep volumes subdued in the precious complex.
Spot silver fell 0.2 percent to $18.91 an ounce.
Platinum lost 0.7 percent at $1,023.75, after falling to fresh over 2-month lows the previous session.
Palladium was down 0.6 percent at $653.30 an ounce.