Oct 3 (Reuters) - Gold prices fell on Thursday on a stronger dollar as investors toned down expectations of another big interest-rate cut from the U.S. Federal Reserve, while looking ahead to Friday's payrolls data for further policy clues.

Spot gold was down 0.3% at $2,650.10 per ounce by 11:40 a.m. ET (1540 GMT), after hitting a record high of $2,685.42 last week. U.S. gold futures was flat at $2,670.50. "Over the last several sessions, gold has consolidated just off its recent highs.

That consolidation is the market in a wait and see mode going into a very important jobs report on Friday. In addition to that, we have seen a major bounce back in the dollar," said David Meger, director of metals trading at High Ridge Futures.

"If there is some sense that the Fed has a higher probability of going 50 bps, that would likely be positive for gold and we could see a little further pull back if the alternate occurs."

The U.S. central bank's fight to return inflation to its 2% target may take longer than expected, limiting how far interest rates can be cut, Richmond Fed President Thomas Barkin said.

Traders watered down their bets for a 50-basis-point rate cut in November to 34% from 49% last week.

Meanwhile, Israel's military urged residents of over 20 southern Lebanese towns to evacuate immediately amid an ongoing incursion following its worst losses in a year of fighting Hezbollah.

"While there was some safe-haven buying following the announcement of the Iranian attack, the possibility that (U.S.) rate cuts might not be as aggressive as anticipated likely limited the gains and continue to do so," said Zain Vawda, market analyst at MarketPulse by OANDA.

Bullion is considered a safe investment during times of political uncertainty and thrives in a low-rate environment.

Spot silver fell 0.2% to $31.80, platinum dropped 1.2% to $990.65 and palladium slipped 1.9% to $996.02.