* Gold hit its highest since June 5 on Thursday

* Palladium, platinum head for weekly loss

* September rate hike odds cut to just 33%: CME FedWatch

* U.S. threatens to maintain naval blockade on Iran

(Updates for EMEA morning hours)

By Dharna Bafna

Aug 14 (Reuters) - Gold prices pulled back on Friday as the

rally lost steam, and traders booked profits after bullion

climbed to a more than two-month peak on fading bets of U.S.

Federal Reserve interest rate hikes.

Spot gold eased 0.1% to $4,344.24 per ounce by 0851

GMT, extending losses after declining 1.3% in the last session

and erasing most of this week's gains. U.S. gold futures

for December delivery fell 0.4% to $4,400.40 per ounce.

"Gold trades lower for a second day as profit-taking sets in

following a strong run of gains, with tame U.S. inflation data

and reduced expectations for further rate hikes largely priced

in for now," said Saxo Bank analyst Ole Hansen.

"Following the breakout last week, gold is now caught in a

$4,200 to $4,500 range with the latter being the 200-day moving

average, a key signal for medium to longer term investors," he

added.

Bullion rallied to its highest point since June 5 on

Thursday.

U.S. producer prices were unchanged in July, following a revised

0.1% drop in June, while U.S. consumer prices barely increased

last month as the cost of gasoline declined for a second

consecutive month.

Traders are now pricing only a 33% chance of a rate hike in

September, down from about 44% last week, according to the CME

FedWatch Tool.

Lower interest rates boost gold as it does not yield

interest.

Physical gold discounts in India widened this week to their

highest levels in more than two months as the rally in prices

curbed consumption, while interest in China remained muted.

Meanwhile, oil prices climbed after Washington threatened an

open-ended naval blockade on Iran, reviving supply concerns.

In other metals, spot silver rose 0.3% to $64.67 per

ounce. Platinum was up 0.4% to $1,723.64 per ounce and

palladium gained 0.2% to $1,309.61 per ounce, both metals

were headed for a weekly drop.

(Reporting by Dharna Bafna and Swati Verma in Bengaluru;

Editing by Devika Syamnath)