PRECIOUS-Gold gains as traders buy dips, but on track for?third weekly drop

(Updates for EMEA morning session)

* Traders scale back Fed rate cut expectations

* Iran and Israel launch fresh attacks on each other

* Gold lost over 6% this week

By Pablo Sinha

March 20 (Reuters) - Gold prices rose on Friday on bargain hunting, but remained poised for a third straight weekly drop as signals of a hawkish U.S. Federal Reserve tempered non-yielding bullion's appeal. Spot gold rose 0.6% to $4,674.82 per ounce as of 0943 GMT, rebounding from a near two-month low hit in the previous session. U.S. gold futures for April delivery rose 1.5% to $4,676.30.

"We are starting to see investors who looked for lower prices to buy on dips... near-term prices are likely to stay volatile, with the uncertainty of how the conflict in the Middle East evolves, and how that influences central bank policies," said UBS analyst Giovanni Staunovo. Bullion has lost more than 6% so far this week and has fallen more than 10% since the U.S.-Israeli strike on Iran on February 28. Although gold is often seen as a hedge against inflation, higher interest rates tend to diminish its appeal as the metal offers no yield. Benchmark Brent was on track to rise nearly 5% after Iran hit oil and gas facilities in the Gulf states, forcing production to be curtailed. Surging energy prices in the wake of the Iran war have stoked inflation concerns, dimming the prospect of lower interest rates. Israel and Iran launched fresh attacksagainst each other on Friday, a day after Tehran struck an Israeli oil refinery. Most major developed market central banks held rates steady this week, but underscored their readiness to respond if the energy shock further stokes inflation. Markets now expect the Fed will not cut interest rates any time in 2026, according to the CME's FedWatch tool.

"Gold could go down to $4,500 as the next major round level, but also if fear is increasing again, it could go up well beyond the $5,000 handle, depending on the new smoke concerning the Middle East," said Quantitative Commodity Research analyst Peter Fertig. Meanwhile, gold discounts in India eased this week from near decade-high levels hit last week, while premiums in China declined as physical demand softened. Spot silver fell 0.7% to $72.36 per ounce. Spot platinum rose 0.2% at $1,975.41 and palladium added 0.9% to $1,459.26. (Reporting by Pablo Sinha in Bengaluru; Editing by Leroy Leo)