* U.S. weekly jobless claims drop to 14-month low
* Palladium heads for second straight weekly decline
* Dollar down 0.1%, still on track for weekly rise (Adds comments, details, and updates prices)
By Shreyansi Singh
May 14 (Reuters) - Gold prices edged higher on Friday due to a pullback in the dollar, though gains were curbed as data showing a rise in U.S. inflation fanned fears of a sooner-than-expected rate hike.
The metal traded flat for the week.
"Inflation is not necessarily bad for gold, however, it's bad if the central banks start to act on it, and the market is getting a little bit jittery thinking that this could bring forward the U.S. Federal Reserve's taper a little bit," said Stephen Innes, managing partner at SPI Asset Management.
Key U.S. economic readings this week showed a bigger-than-expected rise in consumer prices and weekly jobless claims dropping to a 14-month low, intensifying concerns over rising inflation and prospects of a rise in interest rates. interest rates increase the opportunity cost of holding bullion.
"Right now we haven't had any inclination that the Fed is about to move anytime soon, I think gold still remains relatively supported," Innes said, adding that strong economic data still remains a key concern.
The U.S. central bank has pledged to keep interest rates low until the economy reaches full employment, and inflation is on track to "moderately" exceed the 2% level for some time. need some more clarity in terms of how persistent inflation is. If it turns out to be transitory, yields will remain lower," said Harshal Barot, a senior research consultant for South Asia at Metals Focus.
Investors now await U.S. retail sales data due later in the day.
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