PRECIOUS-Gold edges lower but set for third weekly gain as US rate-cut bets rise

* Iran says Israel's attacks on Lebanon are a sticking point

* Oil prices set for their steepest weekly fall since June 2025

* US dollar heads for its largest weekly loss since January (Updates prices for European mid-session trade)

By Ishaan Arora

April 10 (Reuters) - Gold prices edged lower, while staying on track for a third straight weekly gain, as the market reassessed the chances of U.S. interest rate cuts if the fragile U.S.-Iran ceasefire holds.

Spot gold was 0.2% lower at $4,755.45 per ounce by 1113 GMT. It has gained 1.7% so far this week.

U.S. gold futures for June delivery fell 1.1% to $4,767.30 on Friday.

The dollar was set for a 1.4% weekly drop, making bullion priced in the currency cheaper for holders of other currencies.

"The announcement of a ceasefire got the market selling oil and sending inflation expectations falling, and rate cuts being priced in again has been supportive for gold over the week," said UBS analyst Giovanni Staunovo.

INFLATION AND RATE CUTS IN QUESTION Oil prices climbed on Friday, driven by concern over disruption of supplies from Saudi Arabia. They still faced an almost 12% weekly drop, the most in a week since June 2025.

Spot gold has fallen about 10% since the war on Iran began on February 28, as elevated energy prices drove expectations of inflation, raising the prospect of higher U.S. interest rates, which are a disincentive to hold non-yield-bearing gold.

Investors anticipate a 24% chance of at least one rate cut by December, according to CME's FedWatch Tool, up from 12% the week prior.

"The system will continue to be influenced by the conflict in the Middle East. But for the longer term, I still hold a positive outlook driven by all the structural factors remaining in place," Staunovo said.

There was no sign Iran was lifting its near-total blockade of the Strait of Hormuz as Tehran cited Israel's ongoing attacks on Lebanon, which included the heaviest strikes of the war on Wednesday, as a sticking point.

Markets are also focused on March's U.S. Consumer Price Index data, due later in the day, for further clues on the Fed's monetary policy direction.

Gold demand in India picked up slightly, while premiums in China narrowed as retail demand slowed.

Among other metals, spot silver rose 0.5% to $75.45 per ounce, platinum lost 2.2% to $2,056.04, and palladium fell 1.7% to $1,530.46. (Reporting by Ishaan Arora in Bengaluru; Editing by Barbara Lewis and Jan Harvey)