* Traders see over 70% chance of 50 bp cut by Fed in Sept

* U.S. unemployment rate rises to 4.3% in July

* Palladium down over 3% at its lowest in 6 years

Aug 5 (Reuters) - Gold prices dropped again in volatile trade on Monday as profit-taking countered support from increasing expectations for a rate cut from the Federal Reserve amid concerns over a U.S. recession, which led to a worldwide sell-off in financial markets.

Spot gold fell 0.4% to $2,433.74 per ounce, as of 0721 GMT. Bullion had slipped 1% earlier in the session before rising as much as 0.7%.

U.S. gold futures edged up 0.2% to $2,475.30.

"There is some profit taking happening while traders try and gauge how aggressive the Fed may be come September with regards to the size of a rate cut," said Tim Waterer, chief market analyst at KCM Trade.

"Markets are in a flux about the U.S. economic outlook and whether rate cuts will arrive quickly enough from the Fed."

Data on Friday showed that U.S. job growth in July fell short of expectations, with the unemployment rate rising to 4.3%, pointing to possible weakness in the labour market and greater vulnerability to recession.

Share markets tumbled and bonds rallied in Asia as U.S. recession fears sent investors rushing from risk assets.

Traders are pricing a more than 70% chance of the U.S. central bank lowering rates by 50 basis points in September, compared with an 11.5% chance a week earlier, according to the CME FedWatch tool.

Lower interest rates reduce the opportunity cost of holding a non-yielding bullion.

Investors also kept a close eye on the Middle East conflict, with the Pentagon announcing that the U.S. military will deploy additional fighter jets and Navy warships to the Middle East to strengthen defence against threats from Iran and its allies, Hamas and Hezbollah.

Spot silver was down 1.2% to $28.21 per ounce, platinum fell 2.8% to $931.05 and palladium declined nearly 4% to $855, hitting its lowest since August 2018.

(Reporting by Daksh Grover in Bengaluru; Editing by Janane Venkatraman, Sherry Jacob-Phillips and Eileen Soreng )