Gold prices fell on Friday and were on track for a weekly decline, as an overall stronger dollar and prospects for fewer U.S. interest rate cuts offset support from rising geopolitical risks in the Middle East.

Spot gold was down 0.5% at $3,355.49 an ounce, by 0245 GMT, and down 2.2% so far this week.

U.S. gold futures were down 1% at $3,371.80.

"There's a lot of uncertainty in the Middle East right now that's keeping traders from taking aggressive positions on either the long or short side of the spectrum," said Kelvin Wong, senior market analyst, Asia Pacific at OANDA.

Middle East tensions escalated on Thursday when Israel bombed an Iranian nuclear site, while Iran fired missiles and drone attacks into Israel, including an overnight attack on an Israeli hospital. Neither side has signaled an exit strategy.

President Donald Trump will decide in the next two weeks whether the U.S. will get involved in the Israel-Iran air war, the White House said on Thursday, increasing pressure on Tehran to come to the negotiating table.

Meanwhile, Trump reiterated his call for the Federal Reserve to cut interest rates, saying they should be 2.5 percentage points lower.

The Fed kept rates steady on Wednesday, and policymakers maintained their projections for two quarter-point rate cuts this year.

"Macroeconomic developments, particularly stable yields and renewed USD strength, have not been supportive of (gold) prices," analysts at ANZ said in a note.

"Rising inflation expectations and the Fed's cautious stance have weighed on market expectations around the number of rate cuts this year."

The dollar was set to post its biggest weekly gain in more than a month on Friday. A stronger greenback makes gold more expensive for holders of other currencies.

Elsewhere, spot silver fell 1.6% to $35.82 an ounce, while palladium fell 0.7% to $1,042.92. Platinum fell 1.5% to $1,287.47, but was heading for its third straight weekly gain.(alg)

Source: Reuters