Gold hovered near a two-month high on Friday as inflation and geopolitical risks underpinned the safe-haven metal, while strong demand for palladium set the autocatalyst on course for its best week since March.

Spot gold eased 0.2% to $1,833.95 per ounce as of 1217 GMT. US gold futures fell 0.5% to $1,834.10.

"The sentiment remains positive despite the modest correction (in gold) seen this morning. From a technical point of view, the current decline can be called a pullback, a test to the former resistance zone of $1,830," said Carlo Alberto De Casa, market analyst at Kinesis.

Gold has risen about 0.9% this week after prices climbed to a two-month high of $1,847.72 on Thursday thanks to a retreat in the benchmark US 10-year Treasury yields.

Investor focus is now on the US Federal Reserve's policy meeting on Jan. 25-26 as it plans to hike interest rates to fight inflation.

Gold holds near 1-week high on struggling US dollar

While gold is an inflationary hedge, rising US interest rates reduce the appeal of holding non interest-bearing bullion.

"Apart from inflation concerns, gold prices are benefiting from rising geopolitical tensions, which support safe-haven investment demand," said ANZ analyst Soni Kumari.

Worries about the possible extension of US sanctions or new EU measures if Russia - a major palladium producer - attacks Ukraine have kept investors on the tenterhooks.

Spot palladium has rallied more than 10% so far this week and was up about 0.6% at $2,071.19 per ounce. Platinum eased 0.4% to $1,035.57, but was set for its best week since last June.

Both metals are used in emissions-reducing autocatalysts for vehicles.

While demand prospects for platinum group metals look better this year amid growing expectations of improving semiconductor availability in the second half, prices are likely to remain volatile until the chip supply tightness eases, ANZ's Kumari said.

Silver fell 0.3% to $24.36 per ounce, but was still set for its best week in a year with a gain of 6.2%.