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 Gold retreated on Friday as investors focused on the likelihood that U.S. interest rates are set to rise, but concerns over the course of the Ukraine conflict put safe-haven bullion on track for a second consecutive weekly gain.

Spot gold was down 1.2% to $1,972.86 per ounce by 1307 GMT, but remained poised for a weekly rise of about 0.3%. U.S. gold futures fell 1.3% to $1,974.70.

Gold is now consolidating, with the likelihood of Fed interest rate hikes adding some pressure while investors awaited additional developments surrounding Ukraine, said Brian Lan, managing director at dealer GoldSilver Central.

U.S. inflation ballooned in February, locking in expectations for a Fed rate hike next week, which would in turn translate into an increased opportunity cost of holding non-yielding bullion.

Expectations the U.S. central bank will raise its benchmark overnight interest rate by at least 25 basis points on March 16 stand at 94%, according to CME's FedWatch Tool.

While firm yields are for now dragging on gold, which is pausing for breath, an escalation in Ukraine would throw technical factors "out of the window," said Michael Hewson, chief market analyst at CMC Markets UK.

Also weighing on gold, stocks extended gains after Russian President Vladimir Putin said there had been some progress in Moscow's talks with Ukraine.

In gold, palladium and across markets, investors are struggling to price anything fairly, given the headline risk, Hewson said, adding that "anyone who says they can tell you where gold or anything will be in a week's time is being economical with the facts."

Spot palladium dipped 5.3% to $2,772.82 per ounce. The metal set a record high earlier this week on fears of supply disruption from top-producer Russia, en route to a dip of 7.8% for the week.

Silver dropped 1.4% to $25.51 per ounce. Platinum fell 0.9% to $1,058.98, heading for its biggest weekly decline since November.