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PRECIOUS-Gold poised for 7th drop in eight weeks on US rate hike bets

* Gold dips after two flat sessions
    * Dollar strength, oil weakness hurt gold
    * All eyes on Fed meet next week

 (Updates prices)
    By A. Ananthalakshmi
    SINGAPORE, Dec 11 (Reuters) - Gold drifted lower on Friday
and was headed for the seventh weekly drop in eight weeks as
investors positioned for a likely U.S. rate hike.
    A strong U.S. nonfarm payrolls report last week cemented
expectations of a rate hike at the Federal Reserve's policy
meeting on Dec. 15-16.
    The expected hike would be the first in nearly a decade and
will dent demand for gold, a non-interest paying asset.
    Spot gold fell 0.2 percent to $1,069.50 an ounce by
0646 GMT, after closing flat over the last two sessions. For the
week, bullion fell 1.6 percent.
    "The path of the euro-dollar may be the most visible
influence on gold, at least until the Fed meeting," said HSBC
analyst James Steel.
    "If the Fed raises rates, gold may be in for a knee-jerk
reaction lower," said Steel, adding that the metal will be range
bound until next week's meeting. 
    A robust dollar was limiting interest in gold. The greenback
rose for a second session on Friday, extending a rebound from a
one-month low on expectations of a rate hike. 
    A higher dollar makes greenback-denominated gold more
expensive for holders of other currencies. 
    Weakness in oil was also hurting bullion prices. A slide in
oil could trigger fears of deflation, a bearish factor for gold,
which is often used as a hedge against oil-led inflation.
    U.S. crude prices remained near 2009 lows in early Asian
trading on Friday as oil output in the Middle East continued to
rise despite an existing global glut. 
    The outlook for gold looked bearish. 
    Short positions in COMEX gold futures and options are at
record highs, while assets in SPDR Gold Trust, the top bullion
exchange traded fund, are at their lowest since Sept. 2008.
    Investors have boosted bets that the gold price will soon
drop to $1,000 an ounce, options data show. 
    Gold, on track for a third straight annual decline, has lost
9.8 percent of its value this year.
    The technical picture for gold looks neutral in the
$1,064-$1,084 range, but a break below $1,064 could take the
metal to a near-six-year low of $1,045.85, according to Reuters
technical analyst Wang Tao. 
    Among other precious metals, silver and platinum
 were also headed for a seventh weekly loss in eight
weeks, with declines of around 3 percent. 
    Palladium has lost 5 percent for the week
    
    PRICES AT 0646 GMT   
 Metal            Last     Change   Pct chg
                                           
 Spot gold         1069.5    -1.64    -0.15
 Spot silver       14.109   -0.007    -0.05
 Spot platinum      851.5      2.5     0.29
 Spot palladium     540.3      1.8     0.33
 Comex gold        1069.2     -2.8    -0.26
 Comex silver       14.09    -0.02    -0.14
                                           
 COMEX gold and silver contracts show the
 most active months
 
 (Reporting by A. Ananthalakshmi; Editing Michael Perry and
Gopakumar Warrier)
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