PRECIOUS-Gold heads for weekly drop on talk of March rate rise

    * Gold set for biggest weekly retreat since early November
    * Expectations of March U.S. rate hike rise sharply
    * GRAPHIC-2017 asset returns:

 (Updates prices; adds comment, second byline, NEW YORK
    By Marcy Nicholson and Jan Harvey
    NEW YORK/LONDON, March 3 (Reuters) - Gold fell 1 percent on
Friday and was on track for its biggest weekly loss in 2017 as
speculation grew that the U.S. Federal Reserve would press ahead
with a rate increase this month.
    Fed Chair Janet Yellen said on Friday that the central bank
is set to raise its benchmark interest rate later this month as
long as economic data on jobs and inflation holds up.
    Prior to Yellen's comments, the probability of a Fed move in
March had already risen to nearly 80 percent, money markets
indicated, after hawkish comments from New York Fed chief
William Dudley and San Francisco Fed President John Williams.
    "If there has been a conscious effort (to raise expectations
for a rate hike) I'm about to join it," Fed Vice Chairman
Stanley Fischer told an economists' forum, when asked about
comments by other Fed officials this past week that have boosted
market odds of a March rate hike.             
    Spot gold        was down 0.03 percent at $1,234.41 an ounce
by 2:22 p.m. EST (1922 GMT), after falling 1 percent to
$1,222.51, the lowest since Feb. 15. 
    U.S. gold futures        for April delivery settled down 0.5
percent at $1,226.50.
    Gold prices have retreated more than 2 percent after failing
to decisively break through resistance at their 200-day moving
on Monday. 
    "The market has responded very clearly to the more
aggressive stance by FOMC members regarding rate hikes in
March," Mitsubishi analyst Jonathan Butler said. "It's fair to
say that a rate hike in March is pretty much priced into gold."
    Gold is highly sensitive to rising U.S. interest rates as
they increase the opportunity cost of holding non-yielding
bullion, while boosting the dollar in which it is priced.
    The world's largest gold-backed exchange-traded fund, SPDR
Gold Shares      , reported a second daily inflow on Thursday,
of 1.8 tonnes, bringing the weekly rise to 4 tonnes. 
    The dollar, however, took a breather after two days of gains
on Friday.             
    Other precious metals, however, were firm.
    Spot silver        turned up 0.8 percent to $17.89 but was
set to close the week lower for the first time in 2017. 
    "True to form, physical demand has not driven silver prices,
but political uncertainty has driven greater investor interest
in silver," said Standard Chartered in a note.
    "The narrowing spread between platinum and palladium calls
into question whether the substitution of platinum for palladium
will slow or even reverse given some autocatalysts can make the
switch on a 1:1 basis."
    Palladium        was 0.1 percent higher at $768, while
platinum        rose 1 percent to $995.30. 

 (Additional reporting by Nallur Sethuraman in Bengaluru;
editing by David Evans and Chizu Nomiyama)