Gold prices edged lower on Friday but were still on track to finish the week higher as attention turned to the U.S. Federal Reserve's December policy meeting at which it is widely expected to deliver its third interest rate cut this year.

The dollar rose to its highest in more than two weeks against a basket of currencies. This came after stronger-than-expected U.S. producer price data on Thursday dampened prospects of U.S. interest-rate cuts,

Gold prices ticked lower on Friday, but remained on track for a weekly gain ahead of the U.S. Federal Reserve's policy meeting next week where the central bank is widely expected to deliver its third rate cut for the year.

While the Federal Reserve is expected to cut its key interest rate next week, stubborn inflation could pressure the central bank to keep rate cuts few and far between next year.

The market sees the probability of another 25 basis point interest rate cut at next week's Federal Reserve meeting as rising despite inflation ticking higher in November.

Investors view it as a near given that the U.S. Federal Reserve will cut interest rates by a quarter of a percentage point at its Dec. 17-18 meeting, with more attention focused on policymakers' new economic projections released alongside the decision.

Consumer inflation accelerated in November to 2.7% from 2.6% and core CPI was sticky at 3.3%. But a December Fed rate cut still looks like a sure thing.

Inflation is moving in the wrong direction. U.S. inflation picked up for a second straight month in November on a rise in food and gasoline prices, underscoring that the final stretch of the Federal Reserve's two-year battle against sharply rising prices has become more challenging.

Federal Reserve officials will lower interest rates this month for a third straight time and pare back the number of rate cuts they anticipate next year, according to economists surveyed by Bloomberg News.