(Updates with European trading)

* Dollar holds near six-week high on U.S.-Iran

uncertainty

* Traders see 41% chance of a 25-bp U.S. rate hike in

December

* Trump to swear in Warsh as Fed chair on Friday

* All metals on track for weekly losses

By Noel John

May 22 (Reuters) - Gold edged lower on Friday and was

headed for a second consecutive weekly drop, as elevated oil

prices fuelled fears of inflation and boosted expectations of a

U.S. interest rate hike this year.

Spot gold was down 0.4% at $4,524 per ounce, as of

0904 GMT. The metal has shed about 0.4% so far in the week.

U.S. gold futures for June delivery lost 0.4% to

$4,524.20.

Brent crude oil prices held above $105 a barrel as investors

doubted the prospects of a breakthrough in U.S.-Iran peace

talks, even as Iranian media reported that Iran's foreign

minister met Pakistan's interior minister on Friday to discuss

proposals to end the war.

"Given the current high negative correlation to oil, dollar,

and yields, these - especially oil - will set the tone for gold

in the upcoming sessions," said Ole Hansen, head of commodity

strategy at Saxo Bank.

Higher oil prices stoke inflation risks, increasing chances of

higher-for-longer interest rates. While gold is traditionally

seen as a hedge against inflation, higher interest rates tend to

weigh on the non-yielding metal.

Markets are now pricing in a Federal Reserve rate hike

before year-end, with a 41% chance of a 25 basis-point hike in

December, according to CME Group's FedWatch tool.

The dollar held near a six-week high, making

greenback-priced bullion more expensive for holders of other

currencies.

"Technically, the 200-day moving average at $4,372 and the

50-day at $4,667 continue to define the outer boundaries, with

gold likely retaining a slight negative bias until the Middle

East crisis is resolved," Hansen said.

Elsewhere, U.S. President Donald Trump will swear in Kevin Warsh

as Fed chair later in the day at the White House, the

administration said.

Spot silver fell 1.1% to $75.86 per ounce, platinum

lost 1.5% to $1,935.90 and palladium fell 1.1% to

$1,363.21. All the metals were on course for weekly losses.