Updates with EMEA morning hour trading

By Daksh Grover

Dec 20 (Reuters) - Gold prices gained on Friday as the dollar pulled back from highs ahead of the U.S. Personal Consumption Expenditure data due later in the day, although Federal Reserve's hawkish interest rate outlook set bullion on track for a weekly loss.

Spot gold XAU= was up 0.5% at $2,605.41 per ounce, as of 0941 GMT and U.S. gold futures GCv1 nudged 0.4% higher to $2,619.40.

Bullion has fallen about 1.6% this week so far, after the U.S. central bank on Wednesday projected two 25-bps rate cuts by the end of 2025, which is half a percentage point less in policy easing than officials had expected in September.

"The recent correction in the gold market is related to the Fed meeting, where more "hawkish" sentiments were voiced than expected," said Julia Khandoshko, CEO at European broker Mind Money.

Higher interest rates increase the opportunity cost of holding gold, which does not yield any interest.

"If the Fed only delivers two rate cuts in 2025 we would likely need to moderate our expectations for gold demand from exchange traded funds (ETFs), which could reduce the upside we still expect in bullion prices," UBS said in a note.

U.S. data on Thursday showed stronger-than-expected third quarter growth and a drop in jobless claims, further bolstering expectations of gradual Fed policy easing.

The market is now awaiting the core PCE data, the Fed's preferred inflation gauge, due at 1330 GMT, for further insights into the U.S. economic condition.

Gold started 2024 at $2,000 per ounce and is on track to end the year about 25% higher, signalling optimism in the market and making the $3,000 level achievable in only a matter of time, Khandoshko said.

Elsewhere, spot silver XAG= fell 0.4% to $28.91 per ounce but was headed for its worst week since December 2023.

Platinum XPT= dipped 0.3% at $920.94 and palladium XPD= fell 0.3% to $903.25. Both the metals were poised for weekly losses.

(Reporting by Daksh Grover in Bengaluru, additional reporting by Swati Verma; Editing by Mohammed Safi Shamsi)

((Daksh.Grover@thomsonreuters.com;))