(Updates for US morning open)

* Spot gold down 2.6% for the week

* Markets still pricing 60% odds of September US interest

rate hike

* India swings to gold premium on price retreat

By Sukanya Mitra

June 26 (Reuters) - Gold edged higher on Friday as the

dollar weakened and expectations of U.S. interest rate hikes

eased slightly following inflation data, though prices were

still on track for a fourth consecutive weekly decline.

Spot gold was up 0.51% to $4,046.70 per ounce by 9:39

a.m. EDT (1339 GMT).

U.S. gold futures for August delivery rose 0.35% to

$4,061.40 per ounce.

The U.S. dollar eased from recent highs after the release of

the Fed's preferred inflation gauge on Thursday.

The U.S. Personal Consumption Expenditures Price Index surged

4.1% in the 12 months through May, matching economists'

forecasts in a Reuters poll.

Traders are pricing in about a 60% chance of a U.S. rate hike in

September, lower than an earlier expectation of 64%, according

to CME Group's FedWatch Tool.

Gold is seeing a modest rebound after coming under selling

pressure earlier this week, said Jim Wyckoff, a market analyst

at American Gold Exchange.

Higher interest rates and tighter monetary policy reduce the

appeal of non-yielding bullion, as they tend to boost bond

yields and increase returns on interest-bearing assets.

Spot gold hit more than a seven-month low earlier this week and

prices were down 2.6% for the week.

TD Securities said in a note that, given gold's inverse

relationship with both higher oil prices and a stronger U.S.

dollar, sustained strength in energy markets could put further

downward pressure on the precious metal in the months ahead.

Gold started trading at a premium in India this week for the

first time in a month and a half, as a price correction lifted

buying, while demand stayed subdued in China, the top consumer.

Among other precious metals, spot silver rose 0.42% to

$58.1109 per ounce.

Platinum gained 0.21% to $1,604.45 and palladium

jumped 1.25% to $1,199.25.