PRECIOUS-Gold steady as Israel-Iran conflict escalates, US involvement uncertain

June 20 (Reuters) - Gold held steady on Friday, with geopolitical tensions escalating in the Middle East as Israel and Iran continued their air war, while investors remained wary of possible U.S. involvement.

FUNDAMENTALS

Spot gold XAU= was steady at $3,367.60 an ounce, as of 0020 GMT. Bullion was down 1.9% so far this week.

U.S. gold futures GCcv1 were also stable at $3,384.20.

The conflict in the Middle East intensified on Thursday when Israel bombed Iran's nuclear sites, while Iran fired missile and drone strikes on Israel, including an overnight attack on an Israeli hospital. Neither side has signalled an exit strategy.

U.S. President Donald Trump will decide in the next two weeks whether the U.S. will get involved in the Israel-Iran air war, the White House said on Thursday, raising pressure on Tehran to come to the negotiating table.

Meanwhile, U.S. special envoy Steve Witkoff and Iranian Foreign Minister Abbas Araqchi have spoken by phone several times since Israel began its strikes on Iran last week, in a bid to find a diplomatic end to the crisis, three diplomats told Reuters.

Trump reiterated his calls for the Federal Reserve to cut interest rates, saying the rates should be 2.5 percentage points lower.

The Fed held rates steady on Wednesday, and policymakers retained projections for two quarter-point rate cuts this year.

European officials are increasingly resigned to a 10% rate on "reciprocal" tariffs being the baseline in any trade deal between the U.S. and the European Union, five sources familiar with the negotiations said.

The U.S. dollar index .DXY fell 0.2%, making greenback-priced bullion more affordable for overseas buyers.

Elsewhere, spot silver XAG= was steady at $36.36 per ounce, platinum XPT= fell 0.7% to $1,297.89, while palladium XPD= was down 0.4% to $1,046.71. All three metals were headed for weekly gain.