Gold prices fell over 1 percent on Friday as the dollar held close to two-week highs after US inflation data came in line with expectations, suggesting the Federal Reserve may adopt a cautious stance on additional rate cuts.

Spot gold was down 1 percent at $2,846.19 an ounce by 01:44 p.m. ET (1844 GMT). Bullion has so far lost 3.1 percent for the week, its steepest weekly fall since November.

US gold futures settled 1.6 percent lower at $2,848.50.

The dollar index was set for a weekly gain, making dollar-priced gold more expensive for overseas buyers.

"I think the main element impacting the gold and silver markets is the profit-taking in week-long liquidation (and) the strong US dollar index," said Jim Wyckoff, a senior market analyst at Kitco Metals.

Wall Street's main indexes had a subdued start as investors remain cautious over potential price pressures from President Trump's policies.

"Stock market losses have stoked deleveraging pressure in gold perpetuating the sell-off from Monday's record high," said Peter Grant, vice president and senior metals strategist at Zaner Metals.

The Personal Consumption Expenditures (PCE) price index increased 0.3 percent in January, in line with expectations, after advancing by an unrevised 0.3 percent in December.

"The pricing for Fed expectations overall didn't really materially move. Ultimately it wasn't all that much of a driver for gold prices," Daniel Ghali, commodity strategist at TD Securities, said in reference to the data.

Traders of futures contracts that settle to the Federal Reserve's policy rate maintained bets on Friday that the US central bank will resume cuts to short-term borrowing rates in June.

Higher interest rates dampen non-yielding bullion's appeal.

However, safe-haven gold is set for a second consecutive monthly gain, boosted broadly by concerns over Trump's tariff plans.

Trump said on Thursday his proposed 25 percent tariffs on Mexican and Canadian goods will take effect on March 4, with an extra 10 percent duty on Chinese imports.

Spot silver fell 0.8 percent to $31, platinum lost 1.1 percent to $938.50 and palladium slipped 0.6 percent to $914. All three metals' prices looked set for monthly declines.