PRECIOUS-Gold heads for second weekly loss on rate rise expectations

* U.S.-Iran peace memorandum could be signed on Sunday in Geneva

* Spot gold down 2.7% so far for the week

* Markets await June 16-17 Federal Reserve meeting

* Palladium heads for weekly gain (Adds UBS forecast, updates with latest price)

By Anushree Mukherjee

June 12 (Reuters) - Gold headed for a second straight weekly loss on Friday as expectations of higher interest rates weighed on the non-yielding metal ahead of next week's Federal Reserve meeting.

Spot gold was steady at $4,216.64 per ounce as of 1556 GMT, and was down 2.7% so far for the week.

U.S. gold futures rose 2.9% to $4,234.80 .

"I think that the inflation is going to linger for some time, even if oil prices do come down... we've heard this story before and there's some degree of scepticism," said Peter Grant, vice president and senior metals strategist at Zaner Metals.

Oil prices fell over 2% after the news that a memorandum between the United States and Iran to halt the war in the Gulf could be signed as soon as Sunday, a Western source told Reuters on Friday, with Geneva emerging as the likeliest venue. Iran's Fars news agency, however, citing a source close to the negotiations, denied that speculation.

Gold has been under pressure since the conflict began at the end of February, on concerns that oil-driven inflation means central banks will keep interest rates elevated.

While investors regard gold as an inflation hedge, higher rates tend to weigh on the non-yielding metal.

Traders are pricing in a 57% chance of a U.S. rate hike by December, according to the CME FedWatch tool.

Data this week showed U.S. producer prices increased more than expected in May, while consumer inflation jumped above 4%.

Attention is also turning to the Federal Reserve's June 16-17 policy meeting, the first to be chaired by Kevin Warsh, when the market expects the bank to hold rates steady.

UBS has lowered its gold outlook, warning that delayed Fed rate cuts will pressure prices toward the $3,850-4,000/oz range in the near term.

Elsewhere, Rolex raised the global price of its gold watches by an average 5% this month, marking a rare second annual increase for its main markets including Britain, Hong Kong and the U.S., according to two luxury research platforms and two dealers.

Spot silver rose 0.2% to $67.47 per ounce and platinum fell 0.8% to $1,706.61, with both metals headed for a weekly loss. Palladium rose 0.4% to $1,273.47, and was headed for a weekly gain. (Reporting by Anushree Mukherjee in Bengaluru; editing by Barbara Lewis and Susan Fenton)