Gold fell for a third session on Friday, weighed down by higher yields and a steady dollar, but stayed above the key $2,000 level on expectations of rate cuts towards the end the year.

Spot gold was down 0.6% to $2,004.15 per ounce, as of 1149 GMT, shedding 0.6% so far in the week. U.S. gold futures also fell 0.6%, to $2,006.60.

Gold's losses were limited by concerns over the U.S. debt ceiling issue and lingering worries about the country's banking sector, said Lukman Otunuga, a senior research analyst at FXTM.

Safe-haven bullion tends to gain during times of economic or financial uncertainty.

There is a 90% chance of the U.S Federal Reserve holding rates at its current level in June.

Traders have practically priced in a 25 basis-point cut by September, while the bullish sentiment in the gold market still stands strong over expectations of the Fed cutting rates later this year, Otunuga said.

Fed Governor Michelle Bowman, however, reiterated the central bank's stance on raising rates if necessary to fight still-high inflation.

Higher interest rates weigh on gold, which bears no interest.

The dollar was up 0.2%, hitting its highest in more than a week and on track for its biggest weekly rise since late February. A stronger dollar makes bullion more expensive for holders of other currencies.

Benchmark 10-year yields were higher on the day, but set for a third weekly fall.

While gold could touch record territory at some point, the focus is now on key support zones, the first of which is $1,950-$1,970, where prices faced repeated pushbacks in recent months, Craig Erlam, a senior market analyst at OANDA, said in a note.

Spot silver fell 1.3% to $23.86 per ounce, platinum dropped 1.1% to $1,081.83, while palladium gained 0.8% to $1,562.92.

(Reporting by Seher Dareen in Bengaluru; Editing by Sonia Cheema and Subhranshu Sahu)