LONDON, Sept 15: Gold neared its lowest level in nearly three months while oil was also under pressure on Friday, but nervousness before a G7 meeting and crucial US inflation figures due at 1230 GMT kept the dollar on a tight leash.

The Group of Seven rich nations are due to meet in Singapore this weekend and investors were mostly sidelined in case of a repeat of the financial market turmoil that followed the April G7 meeting.

In April the dollar plunged 2 per cent in a single day versus the yen after the G7 issued a statement that urged China too allow its currency to appreciate to help fix global imbalances.

Our view is that with respect to Monday morning when the market reopens there may be erratic moves in the FX market and risks on dollar/yen are probably to the downside, Frankfurt- based Dresdner Kleinwort currency strategist Michael Klawitter Klawitter said. But we have strong doubts whether the increase involatility will last.

The dollar was flat at 117.63 yen, staying well below the five-month high near 118.15 yen struck earlier in the week.

The Fed held rates steady at its August meeting at 5.25 per cent for the first time in two years. But markets cannot decide whether this marked a pause in the rate cycle or a complete halt. The bank holds a policy meeting next week.

Gold steadied in Europe after falling overnight to its lowest in nearly three months on weaker oil, but investors remained wary because of its persistent decline this week.

Spot gold was at $576.50/577.90 after falling to $572.10 an ounce, its lowest since June 23, against $576.40/577.90 late in New York trading on Thursday, a 2 per cent fall.

Analysts saw prices touching new lows in the short term and trading in a range before resuming an upward path. It has lost 10.6 per cent in little more than a week.

Bonds were also overshadowed by US rate fears before the US inflation figures.

The US to-year notes price was down slightly at 100-02/32, with a yield rising half a basis point at 4.844 per cent. Yields on 10-year note was flat at 4.794 per cent.

The August headline inflation number is forecast to have risen 0.2 per cent month-on-month in August. Core inflation, which excludes food and energy costs, is expected to have risen 0.2 per cent.—Reuters