June 13 (Reuters) - Gold and palladium suffered sharp declines on Monday, as the dollar rallied on bets for steep interest rate hikes by the U.S. Federal Reserve, eroding appeal for bullion and other precious metals.

Spot gold fell 2.2% to $1,829.52 per ounce by 12:05 p.m. EDT (1605 GMT). Gold futures shed 2.4% to $1,829.80.

The dollar index hit a multi-decade peak, becoming the preferred safe-haven at the expense of gold, since rising interest rates reduce appeal for bullion, which pays no interest.

"There's no safety trade anywhere, so gold will be liquidated ... There's a massive correction going on, and when volatility gets that high, you can't find safety or comfort anywhere," said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.

Hotter-than-expected U.S. CPI data on Friday led to traders now betting on a total of 175 basis point (bps) in rate hikes by September, with some seeing a chance for a 75 bps move this week.

Gold hit a one-month trough of $1,824.63 post the inflation data, but rebounded strongly as economic concerns took centre stage. That volatility has extended into Monday with bullion beating a sharp retreat from a one-month high hit during the Asian session.

The quick unwinding in gold highlights the current tug-of-war between its pricing drivers, with firm inflation being countered by bets for aggressive policy responses, J.P. Morgan said in a note.

A bullish gold outlook would require more signs that economic growth is cracking under the strain of higher inflation, the note added.

Palladium was last down 5.5% at $1,828.92 per ounce. Silver fell 3% to $21.22 an ounce and platinum retreated 3.6% to $938.31.

Michael Hewson, chief market analyst at CMC Markets UK, said in a note that demand concerns due to fresh COVID restrictions in China precipitated sharp falls in autocatalysts platinum and palladium.