PRECIOUS-Gold falls 1.8% after report of US sending more troops to Middle East

(Updates prices)

* US dollar and Treasury yields extend gains

* Silver, platinum and palladium head for weekly fall

By Ashitha Shivaprasad

March 20 (Reuters) - Gold prices fell by 1.8% on Friday as the dollar strengthened on a report that the United States will deploy extra troops in the Middle East, fanning concerns of higher oil prices, inflation, and with it, elevated interest rates.

Spot gold fell 1.8% to $4,563.64 per ounce as of 2:14 p.m. ET (1814 GMT) after earlier rising 1%. U.S. gold futures for April delivery were 0.7% lower at $4,574.90. The dollar and U.S. Treasury yields extended gains after a Reuters report, citing three U.S. officials, that the U.S. military is deploying thousands of additional marines and sailors to the Middle East.

A stronger dollar makes dollar-priced bullion less attractive to holders of other currencies.

The U.S.-Israeli war on Iran has killed thousands, spilled across the Middle East and hit the global economy since the two countries launched a joint attack on February 28. Iran's prolonged blockade of the Strait of Hormuz could keep energy prices elevated and fuel inflation.

"Gold and silver are being dragged lower as markets climb the usual wall of worry ahead of the weekend," said independent metals trader Tai Wong, adding: "Metals are especially wobbly after this week's aggressive drawdown on rate hike fears. It should consolidate soon but it will be a bumpy ride."

Gold is considered a hedge against inflation and uncertainty, but higher interest rates curb the non-yielding asset's appeal. Major global brokerages see a higher likelihood of the European Central Bank and Bank of England raising interest rates, potentially as early as April. The Federal Reserve held interest rates steady on Wednesday and projected higher inflation, while Chair Jerome Powell said its future policy path was subject to unusually high uncertainty due to the war.

Spot silver fell 4.8% to $69.39. Platinum dropped 0.9% to $1,953.18 and palladium slipped 1.6% to $1,423.59. All three metals were on track for weekly declines. (Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Leroy Leo and Alexander Smith)