(Updates prices)
* Gold down over 2% so far this week
* Dollar index hits highest since July 2020
* Silver set for worst weekly fall since mid-June
Jan 28 (Reuters) - Gold was set for its worst week since late November, with its price falling to a six-week low on Friday, as the dollar rallied on an expected U.S. Federal Reserve rate hike in March.
Spot gold was down 0.6% to $1,786.11 per ounce at 1325 GMT, while U.S. gold futures fell 0.2% to $1,791.30.
Gold prices had rallied to an over two-month high earlier in the week as heightened tensions over Ukraine and increased market volatility ratcheted up interest in safe-haven bullion.
Prices have dropped about 4% since, slipping below the 100-day and 200-day moving averages in the last session, after the Fed reaffirmed plans to end its pandemic-era bond purchases and signalled an interest rate hike in March.
"The market seems to be looking at the $1,800 level, which behaves like a giant magnet to the price. And we seem to continue to hover around that point," Ross Norman, an independent analyst, said, adding that the dollar's strength and rising yields were pressuring gold.
Rising rates increase the opportunity cost of holding non-yielding bullion, which is priced in dollars.
"Another rate hike this year has been priced in since the Fed's meeting, as can be seen from the Fed Fund Futures. This was clearly "too much" for gold, causing the price to fall," Commerzbank wrote in a note.
The World Gold Council (WGC) expects demand for jewellery, small bars and coins to remain strong in 2022 and for central banks to continue buying gold but at a slower pace.
Spot silver dropped 1.1% to $22.50 an ounce, and is set for a 7% fall for the week.
Platinum fell 2.3% to $999.08, while palladium declined 2.4% to $2,318.75, but has gained about 10% this week. (Reporting by Swati Verma and Seher Dareen in Bengaluru; Additional reporting by Kavya Guduru; editing by Mark Potter and Alexander Smith)
