PRECIOUS-Gold slides 2% as solid U.S. jobs data trims Fed rate cut bets

* Gold on track for worst week since mid-April

* Robust U.S. jobs data knocks gold below $1,400 an ounce

* Nonfarm payrolls increased 224,000 in June vs 160,000 expected

* Palladium set to post fifth weekly rise (Updates prices)

July 5 (Reuters) - Gold slid as much as 2% on Friday and was set for its first weekly fall in seven weeks after data showed U.S. jobs growth rebounded strongly in June, which lowered the likelihood of an interest rate cut by the Federal Reserve this month.

Spot gold dropped 1.2% to $1,398.71 per ounce by 1:43 p.m. EDT (1749 GMT) having hit a low of $1,386.52 earlier. The metal is set for a weekly decline of about 1%, which could be its biggest since mid-April.

U.S. gold futures settled 1.5% down at $1,400.10.

Nonfarm payrolls increased by 224,000 jobs last month, the most in five months, data showed. Economists polled by Reuters had forecast payrolls rising by 160,000 jobs.

“The U.S. jobs data is driving all the pressure on gold right now. The payroll numbers crushed all expectations. That may decrease the urgency for a Fed cut in July,” said Chris Gaffney, president of world markets at TIAA Bank.

Adding pressure on gold, the dollar surged to an over two-week peak against a basket of six major currencies.

Gold is highly sensitive to interest rates and a lower chance of a cut would increase the opportunity cost of holding the non-interest-bearing bullion.

Federal funds futures implied traders now see only a 9.0% chance the U.S. central bank will decrease key money market rates by half a point, down from 29% on Wednesday, according to CME Group’s FedWatch program.

“Most of the markets though, still see some kind of cut but it pulls away that expectation of a 50-basis-points cut and most of what can be expected is a quarter-basis-point cut,” Gaffney said.

The outlook for gold still remains positive, however, analysts said. Gold hit a six-year high of $1,438.63 an ounce last week and is still holding above key technical levels.

“The yellow metal will likely find buyers as the global growth slowdown should keep demand strong for gold,” Edward Moya, senior market analyst at OANDA, said in a note.

Gold is often seen as an alternative investment during times of political and financial uncertainty.

Meanwhile, in India, the world’s second largest gold consumer, local rates surged to record highs following a surprise hike in the gold import duty on Friday.

The announcement is likely to increase the price paid by consumers, Capital Economics said in a note.

“While we had already been anticipating a slowdown in India’s gold imports this year, soaring prices and higher tariffs present an additional headwind to demand.”

Silver slid 1.9% to $14.99 per ounce, while platinum dipped 3.4% to $804.

Palladium gained 0.58% to $1,571.01 an ounce and was heading for a fifth straight weekly gain. (Reporting by Swati Verma and Diptendu Lahiri in Bengaluru; editing by Chris Reese and Chizu Nomiyama)