* Hezbollah leader rejects Lebanon ceasefire deal

* Precious metals on track for weekly loss

* US nonfarm payrolls data due at 1230 GMT

* Gold demand in India subdued amid volatile prices

(Rewrites for Europe morning session)

By Noel John

June 5 (Reuters) - Gold edged lower on Friday, and was

headed for a weekly loss, as fading hopes of a swift resolution

to the Middle East conflict fuelled fears of higher inflation

and elevated interest rates.

Spot gold was down 0.2% at $4,463.73 per ounce at

0849 GMT. The metal has fallen about 1.6% so far this week.

U.S. gold futures for August delivery fell 0.3% to

$4,491.

The Iran-backed Hezbollah militia rejected a new ceasefire

in Lebanon and Israel said it would not withdraw troops from the

country, undermining U.S. President Donald Trump's efforts to

halt fighting there to forge peace with Tehran.

"When the Iran-U.S. negotiations don't seem to be going in

the right direction, it tends to drive up oil prices. That

triggers inflation fears and increases the likelihood that

interest rates will remain relatively high, pressuring gold,"

said Nitesh Shah, commodity strategist at WisdomTree.

Brent crude oil prices have risen 2.8% so far this week as

the key Strait of Hormuz remains largely shut. Bullion has

fallen about 16% since the Iran conflict began in late February

as oil prices rose, stoking fears of inflation and higher

interest rates.

While gold is seen as a hedge against inflation, higher

rates tend to weigh on the non-yielding metal.

Markets are currently pricing in a Federal Reserve rate hike

before year-end, with a 37% chance of a 25 basis point hike in

December, according to CME Group's FedWatch tool.

Investors now await May U.S. nonfarm payrolls data, due

later in the day, to gauge the Fed's monetary policy path.

"The main driver of the weaker gold price is lackluster

investment demand - and that is influenced by the U.S. economy

still expanding at a solid pace, while inflation is trending

higher. The payroll data will be an important input factor for

the Fed," said UBS analyst Giovanni Staunovo.

Meanwhile, gold demand was subdued in India this week as

buyers stayed on the sidelines due to volatile overseas prices,

while premiums in China eased.

Spot silver fell 1.7% to $72.58 per ounce, platinum

dropped 1.2% to $1,877.82, and palladium slid 1.5%

to $1,300.90. They were all headed for a weekly loss.