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PRECIOUS-Gold drops 1%, en route worst week in 6-months on dollar strength

Sumita Layek

(Updates prices, adds comments and details)

* Gold down nearly 1.3% over the week

* Palladium set for eighth straight weekly gain

* Platinum poised for worst week in over one-month

Sept 27 (Reuters) - Gold fell more than 1% to a one-week low on Friday and was set for its worst week in six months as the dollar hit multi-week highs on doubts whether the U.S. Federal Reserve will cut interest rates again in October, denting bullion's appeal.

Spot gold was down 0.9% at $1,492.37 an ounce by 11:21 a.m. EDT (1521 GMT) after touching its lowest since Sept. 18 at $1,486.60. The metal has retreated by nearly 1.3% over the week.

U.S. gold futures dipped 1.1% to $1,499 an ounce.

"Central bank easing is being called into question as many Fed officials are saying that maybe we don't need as much ongoing stimulus in the market," said David Meger, director of metals trading at High Ridge Futures.

"The dollar is undoubtedly firmer as a result and is pulling gold down."

On Thursday, Fed Vice Chair Richard Clarida said U.S. inflation expectations are currently in line with the central bank's 2% goal, an indication that he does not see a pressing need for new rate cuts to boost inflation.

Supporting the view, Dallas Fed President Robert Kaplan on Wednesday said even though the world economy was going through a "fragile" period, odds of a U.S. recession over the next year remain "relatively low."

The dollar index climbed to a three-week peak against a basket of rival currencies. A stronger dollar makes gold costlier for holders of other currencies.

"This past week the dollar has been going higher because globally people do not anticipate the Fed to go to zero or close to zero like the ECB (European Central Bank) and other places," said Bob Haberkorn, senior market strategist at RJO Futures.

"The U.S. durable goods number also came better than expected and people are getting out of gold here just because that data does not support another rate cut."

Data earlier on Friday showed U.S. durable goods orders rose 0.2% in August versus an expectation of -1%.

"While global central bank easing, (the U.S.-China) trade war, economic growth concerns, geopolitical tensions in Mideast and other places, alternative investment demand due to recessionary fears will remain in place, at this moment they look wobbly and are allowing this pullback in the gold market," High Ridge Futures' Meger said.

Among other precious metals, silver fell 2.2% to $17.41 an ounce.

Platinum rose 0.5% to $934.90 and was on track for its worst week in over a month.

Palladium was up 1.3% to $1,689.46 an ounce. The auto-catalyst metal, which is in short supply, was up nearly 3% for the week and on track for a eighth straight weekly gain. (Reporting by Sumita Layek in Bengaluru; Editing by Dan Grebler)