By Maytaal Angel
LONDON (Reuters) - Gold hit a two-week high on Thursday as the dollar fell and investors fretted over weak Chinese data and U.S.-China trade frictions, though the precious metal's upside was capped by a slightly more hawkish Federal Reserve.
The dollar edged back against the euro as speculation grows the European Central Bank (ECB) will signal an end date for its vast stimulus programme at its policy meeting, giving back all its gains following Wednesday's Fed meeting.
As widely expected, the Fed lifted key overnight borrowing costs by a quarter percentage point. It also projected two more rate increases by the end of this year, compared to one previously.
A weak dollar makes dollar-priced gold cheaper for non-U.S. investors.
Spot gold rose 0.5 percent to $1,304.65 per ounce at 1020 GMT. It earlier hit a high of $1,303.58 an ounce, its best since May 31.
U.S. gold futures for August delivery rose 0.6 percent to $1,308.90 per ounce.
"Trade tensions and the dollar downtrend are supportive for gold but having said that we don't think the upside is open because there are headwinds coming from the global recovery ... and the fact that the Fed is more hawkish," said Societe Generale analyst Robin Bhar.
In the wider markets, global shares slipped amid worries over a more hawkish Fed and ECB, with investors concerned also about surprisingly weak Chinese data and U.S. threats to impose tariffs on billions of dollars in Chinese goods.
Weaker equities tend to support gold, seen as a store of value in times of economic and political turmoil.
"Reports that President Trump was preparing to put tariffs on billions of dollars of Chinese goods as soon as Friday raised concerns in the market that economic growth would be impacted. This saw some safe-haven buying emerge," ANZ said in a note.
U.S. President Donald Trump will meet his top trade advisers on Thursday to decide whether to activate threatened tariffs on Chinese goods. [nL1N1TF2BU]
China's central bank left borrowing costs for interbank loans unchanged on Thursday, an unexpected decision that shrugged off the U.S. Federal Reserve's increase in its benchmark rate overnight.
In other precious metals, silver climbed 0.7 percent to $17.12 an ounce, having earlier hit $17.15 an ounce, its highest since April 20.
Platinum was 0.9 percent higher at $906.80 an ounce, while palladium gained 0.8 percent to $1,016.90 per ounce.
(Additional reporting by Karen Rodrigues and Swati Verma in Bengaluru; Editing by Adrian Croft)