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Gold prices rose on Friday, supported by a softer dollar and escalating Middle East conflict lifting safe-haven appeal, but were set for a second weekly fall as traders reassessed hopes for early interest rate cuts in the United States.

FUNDAMENTALS

* Spot gold was up 0.3% at $2,034.06 per ounce, as of 0231 GMT. However, it has fallen 0.6% so far in the week.

* U.S. gold futures rose nearly 1% to $2,038.40.

* The dollar index fell 0.1%, making bullion more attractive for buyers holding other currencies. [USD/]

* The United States and Britain launched strikes against sites linked to the Houthi movement in Yemen, while Saudi Arabia called for restraint in light of the strikes.

* Data showed U.S. consumer prices rose more than expected in December, but excluding volatile food and energy costs the pace of price increases fell to 3.9% from 4% on an annual basis, showing ongoing moderation in underlying price pressures.

* Chicago Fed President Austan Goolsbe signalled he's not sure if it is enough progress for the Fed to start cutting rates, while Cleveland Fed President Loretta Mester said it would likely be too soon to cut rates in March.

* The Fed is expected to hold its policy rate steady at the Jan. 30-31 meeting. Financial markets see a 71% chance that rate cuts will begin in March.

* Overall, traders are betting on 150 basis points (bps) of Fed rate cuts this year, according to LSEG's interest rate probability app, IRPR.

* Investors will next look at U.S. producer prices data due at 1330 GMT.

* Spot silver rose 0.6% to $22.88 per ounce, platinum climbed 0.3% to $917.48, and palladium gained 0.3% to $991.02.

DATA/EVENTS (GMT)

0300 China Trade balance Dec

0700 UK GDP Estimate Nov

0700 UK Industrial Output Nov

1200 India Industrial Output Nov

1200 India CPI Inflation Dec

1330 US Producer Price Index Dec

1500 US Fed's Neel Kashkari speaks --