* Gold up 0.4 percent for the week
* Dollar steadies above 5-month low
* Silver hits highest in almost five months (Updates throughout, changes dateline from SINGAPORE)
By Clara Denina
LONDON, March 18 (Reuters) - Gold edged down on Friday, as the dollar steadied from a five-month low, but it remained on track to end the week on a firmer note after the Federal Reserve scaled down rate hike expectations.
Spot gold XAU= was down 0.3 percent at $1,254.53 an ounce by 1130 GMT, while U.S. gold GCcv1 fell 0.8 percent to $1,255.30 an ounce. Spot gold was up around 0.4 percent on the week.
"There has been a bit of selling into the rally in the past couple of days but on whole gold has managed to hang on to its gains," Mitsubishi Corp analyst Jonathan Butler said.
"With the dovish overall macro outlook - the Fed's more dovish stance and ECB and Bank of Japan also pursuing very aggressive stimulus policies - affecting the strength of the dollar and U.S. Treasury yields, gold should benefit."
The dollar rose 0.3 percent against a basket of main currencies, but was still near a 17-month low against the yen and set to end the week 1.5 percent lower.
The U.S. central bank held interest rates steady on Wednesday and indicated it would tighten policy this year, but fresh projections showed policymakers expect two quarter-point increases by year-end, half the number forecast in December.
Expectations the Fed would raise rates steadily this year had faded since the bank's initial hike in December, as concerns over global growth roiled financial markets.
A low interest rate environment tends to decrease the opportunity cost of holding non-yielding bullion.
SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings rose 1.50 percent to 807.09 tonnes on Thursday from 795.20 tonnes on Wednesday. XAG= rose more than 1 percent to its highest since late October at $16.13. It is up 4 percent this week.
Platinum XPT= fell 0.3 percent to $980 and palladium XPD= gained 0.5 percent to $592.70.