Gold gained on Friday as the dollar and bond yields eased but remained on course for a third straight weekly dip as strong U.S. economic data reinforced bets that the Federal Reserve will keep interest rates elevated.

Spot gold was up 0.2% at $1,893.10 per ounce by 1208 GMT, after touching its lowest in five months on Thursday. U.S. gold futures rose 0.4% to $1,923.00.

The dollar was down 0.1%, making gold cheaper for holders of other currencies.

"Ultimately, the medium-term outlook for gold is set to be influenced by Powell's highly anticipated speech at Jackson Hole. In the meantime, $1,900 remains a key level of interest," said Lukman Otunuga, senior research analyst at FXTM.

"Sustained weakness below the $1,900 level may open a path toward $1,870."

Traders expect the Fed to hold rates in the 5.25%-5.5% range until 2024, according to CME's Fedwatch tool.

"If the market interprets what is said there as making another rate hike more likely in the U.S., the gold price could fall somewhat further still," said analysts at Commerzbank in a note.

"In general, we are convinced that U.S. interest rates have already peaked."

Benchmark 10-year U.S. Treasury yields eased from their highest levels since October, propping up zero-yielding bullion.

On Thursday, holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, registered the biggest drop since July last year.

UBS cut its year-end target for gold from $2,100/oz to $1,950/oz, highlighting that the next boost in gold prices would require a renewal of ETF demand, expecting gold to remain range-bound until such a time.

However, the Swiss bank forecast central bank gold-buying would remain strong for the rest of the year.

Spot silver rose 0.4% to $22.78 per ounce. Platinum gained 1.3% to $901.31 while palladium was up 0.1% at $1,218.58, though both were set for weekly declines.

(Reporting by Seher Dareen and Swati Verma in Bengaluru; Editing by Kirsten Donovan)