* Gold down 2.3% so far this week

* U.S. dollar set for second weekly rise

* Gold may slide further into $1,938-$1,947 range - technicals

May 19 (Reuters) - Gold prices advanced on Friday, tracking a pullback in the dollar, but increased optimism around a U.S. debt limit deal set prices on track for a weekly drop.

Spot gold rose 0.3% to $1,964.09 per ounce by 1110 GMT, after hitting its lowest since early April on Thursday.

U.S. gold futures rose 0.4% to $1,967.80.

The dollar index slipped 0.3% on the day and made gold more affordable for holders of other currencies, but the index was headed for a second straight weekly gain.

The yellow metal was on track for its worst week since early February, down about 2.3% so far.

"Gold has been dragged below the psychologically-important $2,000 level this week due to optimism surrounding a U.S. debt deal," said Han Tan, chief market analyst, Exinity.

Democrat Party negotiators told President Joe Biden on Friday that they are making "steady progress" in talks with Republicans aimed at avoiding a U.S. default, according to a White House official.

Gold soared to $2,072.19 earlier this month, just cents away from an all-time high of $2,072.49, but has since lost about 5% following data that showed a tight labour market and still-high inflation.

Moreover, "the hawkish undertones from recent Fed speak, along with some still-resilient U.S. economic data have prompted markets to now forecast a 30% chance of a June rate hike," Tan added.

High interest rates discourage investment in non-yielding bullion.

The latest comments from Fed officials on Thursday that inflation was not cooling fast enough to allow the Fed to pause its interest-rate hike campaign added to the hawkish rhetoric.

Gold might slide further into a range of $1,938-$1,947 per ounce, according to Reuters technical analyst Wang Tao.

Spot silver rose 0.4% to $23.60 per ounce, platinum was up 1.6% to $1,065.34 while palladium jumped 4% to $1,511.40.

(Reporting by Kavya Guduru in Bengaluru; Editing by Rashmi Aich and Emelia Sithole-Matarise)