* Gold dips after two flat sessions
* Dollar strength, oil weakness hurt gold
* All eyes on Fed meet next week (Updates prices)
By A. Ananthalakshmi
SINGAPORE, Dec 11 (Reuters) - Gold drifted lower on Friday and was headed for the seventh weekly drop in eight weeks as investors positioned for a likely U.S. rate hike.
A strong U.S. nonfarm payrolls report last week cemented expectations of a rate hike at the Federal Reserve's policy meeting on Dec. 15-16.
The expected hike would be the first in nearly a decade and will dent demand for gold, a non-interest paying asset.
Spot gold XAU= fell 0.2 percent to $1,069.50 an ounce by 0646 GMT, after closing flat over the last two sessions. For the week, bullion fell 1.6 percent.
"The path of the euro-dollar may be the most visible influence on gold, at least until the Fed meeting," said HSBC analyst James Steel.
"If the Fed raises rates, gold may be in for a knee-jerk reaction lower," said Steel, adding that the metal will be range bound until next week's meeting.
A robust dollar was limiting interest in gold. The greenback rose for a second session on Friday, extending a rebound from a one-month low on expectations of a rate hike. USD/
A higher dollar makes greenback-denominated gold more expensive for holders of other currencies.
Weakness in oil was also hurting bullion prices. A slide in oil could trigger fears of deflation, a bearish factor for gold, which is often used as a hedge against oil-led inflation.
U.S. crude prices remained near 2009 lows in early Asian trading on Friday as oil output in the Middle East continued to rise despite an existing global glut. O/R
The outlook for gold looked bearish.
Short positions in COMEX gold futures and options are at record highs, while assets in SPDR Gold Trust, the top bullion exchange traded fund, are at their lowest since Sept. 2008.
Investors have boosted bets that the gold price will soon drop to $1,000 an ounce, options data show. urn:newsml:reuters.com:*:nL3N13X2BO
Gold, on track for a third straight annual decline, has lost 9.8 percent of its value this year.
The technical picture for gold looks neutral in the $1,064-$1,084 range, but a break below $1,064 could take the metal to a near-six-year low of $1,045.85, according to Reuters technical analyst Wang Tao. urn:newsml:reuters.com:*:nL3N14005E
Among other precious metals, silver XAG= and platinum XPT= were also headed for a seventh weekly loss in eight weeks, with declines of around 3 percent.
Palladium XPD= has lost 5 percent for the week
PRICES AT 0646 GMT
Metal
Last
Change Pct chg
Spot gold
1069.5
-1.64
-0.15 Spot silver
14.109 -0.007
-0.05 Spot platinum
851.5
2.5
0.29 Spot palladium
540.3
1.8
0.33 Comex gold
1069.2
-2.8
-0.26 Comex silver
14.09
-0.02
-0.14
COMEX gold and silver contracts show the most active months