Gold eased on Friday on a stronger dollar, but held close to the previous session's highs en route to a weekly gain helped by bets that the Federal Reserve could soon pause interest rate hikes.

Spot gold fell 0.3% to $1,962.34 per ounce by 5:52 a.m. ET (0952 GMT), but headed for a 0.8% weekly climb, having jumped about 1.5% after a surge in U.S. weekly jobless claims. U.S. gold futures held steady at $1,978.20. The dollar index was up 0.2%, yet hovered close to Thursday's lows. A stronger dollar makes gold expensive for overseas buyers.

The market is still looking for a hedge against an economic slowdown, providing some underlying support to gold, said Ole Hansen, head of commodity strategy at Saxo Bank.

"For now, there are no clear signals... but we've seen a decent bounce this week and found support in the low $1,930s," Hansen added.

Higher rates raise the opportunity cost of holding non-yielding bullion.

Focus now shifts to the U.S. consumer inflation report for May, due on June 13, a day before the Fed announces its policy decision.

Markets are pricing in a 76% chance of the Fed standing pat next week, after having raised at every meeting since March 2022, while odds of a 25 bps rate hike in July were 52%, per the CME Fedwatch tool.

"We continue to expect gold to rise over the coming year, supported by a weaker US dollar, strong central bank demand, and safe-haven flows," analysts at UBS said in a note.

Palladium, used in emissions-controlling devices in cars along with platinum, slipped to its lowest since June 2019, hovering at $1,344.

Silver rose 0.5% to $24.35 per ounce, eyeing its best week since early April. Platinum fell 0.3% to $1,007.69, but headed for its first weekly gain in three.

(Reporting by Seher Dareen in Bengaluru; Editing by Sohini Goswami)