PRECIOUS-Gold hits 3-wk high as dollar dives; heads for 2nd weekly gain

    * Spot gold may test resistance at $1,250 per ounce -
    * Dollar touches lowest in 13 months

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    By Nithin ThomasPrasad
    BENGALURU, July 21 (Reuters) - Gold hit a three-week high on
Friday and was on track for a second straight weekly gain as the
dollar tumbled to a 13-month low.
    A near 2 percent rise in the euro           this week pinned
the dollar to multi-month lows against a trade-weighted basket
of its rivals.       
    The euro rose to its highest since August 2015 in early
European trade on Friday as the single currency's bounce
prompted some investors to cover short positions.
    It climbed 0.3 percent to $1.16650 as markets bet the
European Central Bank would tweak its policy stimulus in the
    "The dollar weakness should continue to support gold around
current levels and we look to a break through the 100- and
50-day moving averages as a pivot point for further gains," MKS
PAMP trader Sam Laughlin said in a note.
    A weaker dollar makes U.S. dollar-denominated gold more
attractive for buyers using other currencies.
    Spot gold        was up 0.2 percent at $1,247.17 per ounce
as of 0732 GMT, after hitting its highest since June 29 at
$1,248.30. It has gained about 1.5 percent so far this week.    
    U.S. gold futures         for August delivery rose 0.1
percent to $1,246.50 per ounce.
    "What we're seeing right now is the overhang from political
risks in the United States," said Stephen Innes, head of trading
for Asia Pacific at OANDA in Singapore.
    The Republican Party's repeated failures to overhaul the
healthcare system and multiple congressional and federal
investigations into President Donald Trump's campaign ties to
Russia have cast a shadow over his first six months in office.
    Spot gold may test a resistance at $1,250 per ounce, a break
above which could lead to a further gain to $1,261, according to
Reuters technical analyst Wang Tao.             
    "If the downside is limited at $1,200, any large
disappointment in the (economic) growth story will lead to an
increase in gold prices" said Dominic Schnider at UBS Wealth
Management in Hong Kong.
    "The appeal of gold as an insurance asset is greater today
than it was at the beginning of the year."
    Gold is often perceived as an insurance against economic and
financial concerns.
    Among other precious metals, silver        rose 0.6 percent
to $16.38 per ounce after touching $16.42 in the previous
session, the highest since July 3.
    "The grey metal is encountering some resistance toward 
$16.40, once again testing the figure during Asian trade on
Friday, however unable to break through," said MKS PAMP trader
    Platinum        fell 0.4 percent to $923.00 per ounce, but
was set for a weekly gain.
    Palladium        rose 0.7 percent to $848.75 per ounce, but
was down over 1 percent for the week.

 (Reporting by Nithin Prasad and Arpan Varghese in Bengaluru;
Editing by Richard Pullin and Subhranshu Sahu)