PRECIOUS-Gold hits near 6-year low, set for another weekly drop

* U.S. dollar at 8-1/2 month peak above 100
* Chinese buying unable to support gold prices
* Silver, platinum, palladium head for weekly declines

(Updates prices, comment)
By Chris Prentice and Clara Denina
NEW YORK/LONDON, Nov 27 (Reuters) - Gold dropped almost two
percent to a near six-year low on Friday, set for a sixth
straight weekly decline under pressure from a firm U.S. dollar
and prospects of a U.S. interest rate rise next month.
Spot gold XAU= hit $1,052.46 an ounce, its lowest since
February 2010, and was down 1.3 percent at $1,057.50 by 12:59
p.m. EST (1759 GMT).
Spot prices were down about 2 percent for the week. U.S.
gold futures GCcv1 hit a six-year low of $1,051.10 an ounce
before closing down 1.3 percent at $1,056.20 and skidding to a
sixth straight weekly decline.
Gold was hit by the dollar's advance. The greenback was
trading near March's multi-year highs against a basket of major
currencies. FRX/
"The chatter is all about exchange rates ... Gold is down on
the dollar," said Phillip Streible, senior commodities broker
for RJO Futures in Chicago.
Greenback-denominated commodities like gold become more
expensive for foreign investors when the U.S. currency rises.
The Federal Reserve is widely expected to raise U.S. rates
for the first time in nearly a decade when it meets next on Dec.
15-16. Higher rates would rise the opportunity cost of holding
non-yielding gold and could dent demand and boost the dollar.
"The omens are not positive for gold in the lead-up to the
December rate meeting," Societe Generale (PA:SOGN) analyst Robin Bhar
said.
Buying in China has been good but has been unable to support
prices, traders said.
Premiums on the Shanghai Gold Exchange, a proxy for demand
in China, were trading at $5-$6 an ounce, versus $3-$4 at the
beginning of the month.
However, other physical demand indicators were not upbeat.
India's gold buying in the key December quarter is likely to
fall to the lowest level in eight years, hurt by poor investment
demand and back-to-back droughts that have slashed earnings for
the country's millions of farmers.
China's net gold imports from main conduit Hong Kong fell in
October from a 10-month high, data showed on Thursday.

Precious metals funds posted their biggest net outflow last
week in around four months, said Bank of America Merrill Lynch (N:BAC).

In other precious metals, silver XAG= , platinum XPT= and
palladium XPD= were all heading for weekly declines. Silver
was down 1.2 percent at $14.08 an ounce, platinum was down 1.9
percent at $834.25, not far off a seven-year low hit earlier in
the week. Palladium dropped 1.5 percent to $547.25.