May 26 (Reuters) - Gold prices languished near a two-month low on Friday and were set for their third straight weekly fall, as progress in U.S. deal ceiling negotiations bolstered the dollar.



* Spot gold was flat at $1,939.18 per ounce by 0032 GMT after hitting its lowest since March 22 in the previous session. U.S. gold futures were down 0.2% at $1,939.60.

* Bullion has declined 1.9% so far in the week in what could be its biggest since early February.

* The dollar held close to its highest since March 17, making gold less attractive for overseas buyers, while benchmark Treasury yields were also near highs seen in March.

* U.S. President Joe Biden and top congressional Republican Kevin McCarthy on Thursday appeared to be nearing a deal to cut spending and raise the government's $31.4 trillion debt ceiling, with little time to spare to head off the risk of default.

* Adding pressure on gold, official data showed new U.S. jobless claims rose moderately last week, indicating persistent labour market strength.

* On the interest rate front, markets are now pricing in a 51.7% chance of a 25-basis-point hike in June and seeing cuts no sooner than September, according to the CME FedWatch tool.

* Boston Federal Reserve President Susan Collins said on Thursday the time may be at hand for the U.S. central bank to push the pause button on its rate-hiking campaign to see how the impact of past tightening is weighing on activity.

* Gold tends to lose its appeal in a high-interest rate environment.

* Spot silver fell 0.4% to $22.68 per ounce, platinum edged 0.1% lower to $1,019.11, and palladium shed 0.4% to $1,411.12.

DATA/EVENTS (GMT) 1230 US Consumption, Adjusted MM April 1230 US Core PCE Price Index MM, YY April 1230 US PCE Price Index MM, YY April 1230 US Durable Goods April 1400 US U Mich Sentiment Final May

(Reporting by Arundhati Sarkar in Bengaluru; Editing by Subhranshu Sahu)