* Gold retreats from two-month peak

* 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 prices)

By Pablo Sinha and Swati Verma

Aug 14 (Reuters) - Gold prices slipped on Friday and were

headed for a weekly loss as investors locked in profits after

mild U.S. inflation data propelled bullion to its highest level

in more than two months and weakened the case for a near-term

Federal Reserve rate hike.

Spot gold was down 0.6% at $4,324.39 per ounce, as of

0538 GMT. While U.S. gold futures for December delivery

slid nearly 1% to $4,379.20.

Bullion climbed to its highest point since June 5 on

Thursday, before settling 1.3% lower and setting it on track for

a weekly loss.

"There is some episodic and more speculative capital that's

maybe taking a bit of profit in gold, because there's not a

near-term catalyst quite so potent immediately in front of us,"

said Ilya Spivak, head of global macro at finance content

network Tastylive.

"Gold may be setting up, with some choppy trading along the

way, for a meaningful rally now. And if we can take out $4,400,

I don't think $5,000 by year end is any kind of a sketch."

The non-yielding metal got a boost after an unexpected drop

in U.S. July nonfarm payrolls last week, followed by softer

inflation data this week, sharply reducing expectations of a

rate hike next month.

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 55% last week, according to the CME

FedWatch Tool.

Lower interest rates make gold more attractive relative to

yield-bearing assets.

On the geopolitical front, Washington on Thursday threatened

to maintain a naval blockade of Iran indefinitely, ratcheting up

economic pressure on Tehran as ceasefire talks have floundered.

In other metals, spot silver slipped 0.9% to $63.88

per ounce.

Platinum slipped 0.4% to $1,711.10, while palladium

inched 0.1% higher at $1,308.25, both touching their

lowest levels since August 4 earlier in the session. Both metals

were headed for a weekly drop.