* Gold down over 2% this week * U.S. dollar on track for weekly gain (Updates prices) By Kavya Guduru Sept 16 (Reuters) - Gold prices rose on Friday as the dollar stalled, but gains in the greenback over the week and expectations of a sizeable U.S. rate hike kept bullion well below the key $1,700 mark and en route to its worst week in four. Spot gold was 0.5% higher at $1,672.48 per ounce by 2:08 p.m. ET (1808 GMT). U.S. gold futures settled 0.4% higher at $1,683.50. "We saw the dollar turn negative... an acceleration lower on U.S. equities, which may have sparked a bit" of buying, said Phillip Streible, chief market strategist at Blue Line Futures in Chicago. Gold prices were still down about 2.5% so far this week, having earlier slid to their lowest since April 2020. Gold failed to capitalize on fears of rising U.S. recession risks through the week, and was "not even perceived as a safe-haven" on occasion, Streible added. Offering some reprieve to gold, the dollar briefly turned negative before stalling . But it was still bound for a weekly gain, making gold more expensive for overseas buyers. Markets see a 75% chance of a 75-basis-point rate hike by the Federal Reserve next week and a 25% chance of a 100-bps increase. Although gold is considered a hedge against economic risks, rising interest rates make non-yielding bullion less appealing. "It's likely that sudden panic about the potential for 100bps hike after the ugly CPI report contributed to the big drop," said Tai Wong, a senior trader at Heraeus Precious Metals in New York. "However, that remains unlikely and gold is seeing physical demand pushing a short market ahead of a semi-long weekend with London out on Monday." Meanwhile, physical gold demand picked up in India as domestic prices fell ahead of key festivals, while Chinese premiums climbed. Silver gained 1.2% to $19.39 per ounce. Platinum fell 0.2% to $902.50, and palladium dropped 1.1% to $2,112.30. (Reporting by Kavya Guduru in Bengaluru; Editing by Kirsten Donovan and Shinjini Ganguli)
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