* Silver set for best week since May 17

* U.S. nonfarm payrolls report due at 1230 GMT

* Palladium on track for third straight weekly gain

July 5 (Reuters) - Gold prices were poised for a second straight weekly rise on Friday helped by a softer U.S. dollar, while investors braced for the nonfarm payrolls data, which could provide further cues on the Federal Reserve's rate cut timeline.

Spot gold rose 0.4% to $2,364.87 per ounce, as of 0941 GMT, after hitting a two-week high at $2,367.99. Bullion was up more than 1% for the week so far.

U.S. gold futures gained 0.2% to $2,372.90.

Gold prices are witnessing minimal trading activity as a result of reduced activity in U.S. markets due to the Independence Day holiday, said independent analyst Ross Norman. However, the trend is upward, possibly due to a lower dollar caused by recent weak economic data, he added.

Data on Wednesday showed a measure of U.S. service sector activity fell to a four-year low in June, signalling that growth in the world's largest economy was slowing.

The U.S. dollar was on track for a weekly decline, making the greenback-priced bullion more attractive to buyers holding other currencies.

Investors now await the nonfarm payrolls report due at 1230 GMT.

"I think the expectation is that at some point, the Fed will need to start cutting (interest rates) and September is now being looked at as a likely time," Norman added.

The market now sees a 75% chance of the Fed cutting interest rates in September as well as another cut in December. Lower rates reduce the opportunity cost of holding non-yielding bullion.

"Gold demand in early 2024 has been underpinned by central bank purchases – with a key priority of these institutions appearing to be the diversification of assets within their reserves," analysts at NAB said in a note.

Spot silver rose 0.5% to $30.54 and was headed for its best week since May 17.

Platinum rose 0.4% to $1,006.10. Palladium gained 0.6% to $1,023.48 and was set for a third consecutive weekly gain.

(Reporting by Daksh Grover in Bengaluru; Editing by Eileen Soreng)