PRECIOUS-Gold rises as dollar weakens ahead of US inflation test

By Ishaan Arora

Dec 5 (Reuters) - Gold prices rose on Friday, buoyed by a softer dollar as investors braced for U.S. inflation data that may set the tone for the Federal Reserve's interest-rate policy meeting next week.

Spot gold XAU= rose 0.5% to $4,227.35 per ounce, as of 0717 GMT, but was on track for a 0.1% weekly decline.

U.S. gold futures GCcv1 for December delivery edged 0.4% higher to $4,257.90 per ounce.

The dollar .DXY dipped and was languishing not far from a five-week low against major peers. US/USD/

Sellers have been unable to break above Monday's high of $4,264.29, with the market showing signs of caution as traders brace for the Personal Consumption Expenditures (PCE) data, said OANDA senior market analyst Kelvin Wong.

"So this key data is keeping short-term traders more on the conservative side of adding long positions ... while the dollar is now supportive (of gold)."

U.S. data on Thursday showed jobless claims fell to 191,000 last week, the lowest in more than three years, while ADP figures revealed on Wednesday that private payrolls fell by 32,000 in November, the sharpest drop in more than 2-1/2 years.

A majority of more than 100 economists polled by Reuters forecast the Fed will reduce its key interest rate by 25 basis points at its December 9-10 meeting.

Lower interest rates tend to favour non-yielding assets such as gold.

Investors are waiting on the delayed September PCE Index, the Fed's preferred inflation gauge, due at 1500 GMT.

Silver XAG= rose 2% to $58.27 an ounce, set for a weekly rise after touching a record $58.98 on Wednesday. It has surged about 101% so far this year, driven by structural supply deficit, liquidity concerns and its addition to the U.S. critical minerals list.

Platinum XPT= added 1.1% to $1,664.55 and was also set for a weekly loss, while palladium XPD= gained 1.1% to $1,465.02 but was poised to end the week higher.