* Sharp dollar gains weigh down on gold
* Ukraine tensions, technical support help
* Worries of Fed rate hike creep up
* Coming up: U.S. federal budget Monday
(Updates market activities) NEW YORK/LONDON, May 9 (Reuters) - Gold dropped on Friday, notching its second consecutive weekly drop, with selling triggered by a sharp rise in the U.S. dollar and analysts' expectation that the Federal Reserve could raise interest rates next year. Platinum group metals also fell on news that some miners in top platinum producer South Africa are returning to work, offering hope that the country's longest and most costly strike could end soon. Heightened geopolitical tensions underpinned bullion prices after Russia's President Vladimir Putin flew to Crimea for parades marking the Soviet victory in World War Two, his first visit since annexing the peninsula from Ukraine. Pressure on gold came from the euro's sharp decline off a 2-1/2 year high against the dollar extended for a second day, after European Central Bank chief Mario Draghi on Thursday threatened more monetary stimulus. The macro environment continued to weigh down on gold this week, as the ECB chief's comment led to a dollar rally, said Christopher Louney, precious metals analyst at Barclays Capital. "Temporary bouts of strength have driven it above the $1,300 an ounce level several times recently, but we continue to think the underlying fundamentals still point downwards," Louney said. Spot gold was down 0.1 percent at $1,287.51 an ounce average of $1,287 an ounce kept gold from falling further, dealers said. U.S. COMEX gold futures for June delivery settled down 10 cents an ounce at $1,287.60, with trading volume in line with its 30-day average, preliminary Reuters data showed. Gold was down 1 percent this week, after prices tumbled on Wednesday after Fed Chair Janet Yellen said a high degree of monetary accommodation was warranted given "considerable" slack in the U.S. labor market and low inflation. Yellen's comment did not alter a consensus that the Fed will start to raise interest rates around July 2015 after completely unwinding its stimulus later this year. In the physical market, gold premiums in India, the world's second-biggest bullion consumer, slipped this week as demand eased on expectations of a relaxation in import curbs. Silver eased 0.1 percent to $19.11. South African platinum producer Lonmin Plc is preparing to restart operations next week after taking its latest wage offer directly to striking miners. In addition, the National Union of Mineworkers (NUM) said many of its workers were returning to Anglo American Platinum's Rustenburg operations that have been hit by a 15-week strike by the rival AMCU union. Platinum was down 0.4 percent to $1,426.75 an ounce, while palladium fell 0.5 percent to $796.60.
3:16 PM EDT LAST/ NET PCT LOW HIGH CURRENT SETTLE CHNG CHNG VOL US Gold JUN 1287.60 -0.10 0.0 1285.50 1294.50 101,703 US Silver MAY 19.077 -0.017 -0.1 19.020 19.200 55 US Plat JUL 1429.90 -8.20 -0.6 1426.60 1439.50 5,104 US Pall JUN 799.75 -4.30 -0.5 798.00 806.25 3,118 Gold 1287.51 -1.49 -0.1 1285.98 1294.40 Silver 19.110 -0.020 -0.1 19.070 19.300 Platinum 1426.75 -5.65 -0.4 1426.50 1436.30 Palladium 796.60 -3.90 -0.5 799.50 804.25 TOTAL MARKET VOLUME 30-D ATM VOLATILITY CURRENT 30D AVG 250D AVG CURRENT CHG US Gold 133,481 132,582 179,861 14.93 -0.09 US Silver 32,172 64,035 55,927 22.31 -0.75 US Platinum 5,198 9,115 12,440 15.18 -0.33 US Palladium 3,458 5,839 5,721 23.89 -1.54
(Editing by Susan Thomas and Dale Hudson)