* Political uncertainty supports demand for bullion
* SPDR Gold holdings have risen 5.6 percent this month
* Palladium off over 3-week highs hit Thursday
(Updates prices, dollar rates)
By Devika Krishna Kumar and Eric Onstad
NEW YORK/LONDON, Feb 17 (Reuters) - Gold prices eased on
Friday but notched a weekly gain as investors opted for the
safe-haven qualities of bullion due to uncertainty about U.S.
and European politics as well as the direction of stock markets.
Global equity markets lost momentum after setting record
highs in the previous two sessions, partly due to disquiet about
the policies of U.S. President Donald Trump.
"Gold is close to its recent multimonth high despite the
strong dollar, due to an increase in volatility on the equity
markets and more uneasiness on the political front, which is
supporting the search for safe-haven assets," said Eugen
Weinberg, head of commodity research at Commerzbank.
Spot gold was 0.14 percent lower at $1,237 per ounce
by 2:44 p.m. EST (1944 GMT), while U.S. gold futures
ended the session down 0.2 percent at $1,239.10.
Concern over Trump's policies, as well as elections in the
Netherlands, France and Germany this year, fueled gold's rise to
a peak of $1,244.67 on Feb. 8, the strongest in nearly three
months.
Gold, on track for a third week of gains, has risen nearly 8
percent in 2017. Early in the week, gold prices fell after Fed
Chair Janet Yellen said U.S. interest rates may need to be
raised in March.
"On balance, we still don't think that the Fed will raise
interest rates at the March FOMC meeting, but the 0.6 percent
month-on-month surge in consumer prices in January could prompt
the Fed to move sooner than we anticipate," Capital Economics
analysts said in a note.
Gold prices recovered by Wednesday after strong U.S. data
showed U.S. inflation was picking up.
Bullion is highly sensitive to rising U.S. interest rates,
as these increase the opportunity cost of holding non-yielding
bullion, while boosting the dollar, in which it is priced.
The dollar index rose 0.5 percent to 100.93 on
Friday, recovering from a one-week low of 100.41 the day before.
Holdings of SPDR Gold, the world's largest gold-backed
exchange-traded fund (ETF), have risen 5.6 percent so far this
month, the most since June 2016.
"The market seems to be quite supported by investment
inflows into the ETFs and I think this will be the most
important factor through the year as we expect investors to keep
pouring money into gold ETFs," Weinberg added.
Commerzbank expects gold to hit $1,300 by year end.
Spot silver fell 0.3 percent to $18.03 an ounce. The
metal hit its strongest since Nov. 11 at $18.13 in the previous
session.
Platinum dropped 0.7 percent to $1,004.60.
Palladium declined 1.8 percent to $778.22. The metal,
used in emission-controlling catalytic converters for the
automotive industry, touched its best since Jan. 24 at $795.10
during the prior session. It has gained about 15 percent so far
this year.
(Additional reporting by Nallur Sethuraman in Bengaluru;
Editing by David Evans and Lisa Shumaker)