PRECIOUS-Gold extends fall to near 2-week low on firm dollar, Fed rate-hike bets

(Updates price as of 1110 GMT)

* Traders bet on three rate hikes in 2026 - CME FedWatch

* U.S., Iran at odds over peace deal terms

* Gold down over 4% since Fed meet last week

* U.S. PCE data due on Thursday

By Sumit Saha

June 24 (Reuters) - Gold fell for a second consecutive session on Wednesday, hitting a near two-week low, as a stronger U.S. dollar and expectations of higher interest rates pressured the metal, while investors watched for risks to Middle East peace since the U.S.-Iran peace talks.

Spot gold fell 1.4% to $4,049.44 an ounce as of 1110 GMT, after touching its lowest level since June 11.

U.S. gold futures for August delivery declined nearly 2% to $4,066.70/oz.

"The strong U.S. dollar continues to be a headwind for gold, with lackluster investment demand as gauged by ETF holdings, not helping," said UBS analyst Giovanni Staunovo. The U.S. dollar extended a rally to a 13-month high, making bullion more expensive for overseas buyers.

Markets are now pricing in three Federal Reserve rate hikes this year, a sharp shift from expectations of just one before last week's policy meeting, according to the CME FedWatch Tool.

Higher interest rates reduce the appeal of non-yielding gold. Bullion has fallen over 4% since the meeting.

Current price levels are likely to support central bank buying, which remained steady in May, but persistent inflation concerns at the Fed are expected to cap investment demand and keep near-term risks skewed to the downside, added Staunovo.

Investors are also awaiting U.S. Personal Consumption Expenditures (PCE) data, the Fed's preferred inflation measure, due on Thursday for further signals on the monetary policy outlook. Analysts at ING now expect gold to average $4,300/oz in the third quarter of 2026 and $4,600/oz in the fourth quarter, down from their previous forecasts of $4,850 and $5,000, respectively. On the geopolitical front, U.S. President Donald Trump said on Tuesday that Iran had agreed to indefinite nuclear inspections, while Tehran denied making any such concession, casting doubt over the durability of the fragile peace deal. Among other metals, spot silver fell 2.5% to $60.45 per ounce, platinum lost 2.2% to $1,615.28, and palladium dropped 2.9% to $1,202.07. (Reporting by Sumit Saha in Bengaluru; Editing by Eileen Soreng and Harikrishnan Nair)