* Gold hit its highest since June 5 on Thursday

* Palladium, platinum head for weekly losses

* September rate hike odds cut to just 31%: CME FedWatch

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

(Updates prices and comment)

By Dharna Bafna

Aug 14 (Reuters) - Gold prices steadied on Friday after

pulling back from a more than two-month high, as investors

booked profits following a rally fuelled by softer U.S.

inflation data and fading expectations for a Federal Reserve

rate hike in September.

Spot gold was little changed at $4,351.45 an ounce by

1113 GMT after the contract fell 1.3% in the previous session.

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

$4,407.70 per ounce.

Bullion rallied to its highest point since June 5 on

Thursday.

"Gold is barely holding onto a weekly advance, as markets

indulge in some profit-taking following bullion's mid-week spike

to a two-month high," said Han Tan, chief market analyst at

Bybit.

"The coming week's Federal Open Market Committee meeting

minutes may yet trigger fresh volatility for spot gold, even as

traders keep a watchful eye on global oil benchmarks."

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 31% chance of a rate hike in

September, down from about 44% a week earlier, 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 rallying 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 $64.66 per

ounce. Platinum was up 0.4% to $1,724.90 per ounce and

palladium gained 0.2% to $1,309.28 per ounce, both metals

were headed for a weekly drop.

(Reporting by Dharna Bafna and Swati Verma in Bengaluru;

Editing by Devika Syamnath and Joyjeet Das)