PRECIOUS-Gold climbs to near 3-week high as dollar slides

    * Palladium rallies to highest level in more than a month
    * GRAPHIC-2017 asset returns:

 (Recasts lead to show milestone reached; updates prices; adds
comment, second byline, NEW YORK to dateline)
    By Marcy Nicholson and Jan Harvey
    NEW YORK/LONDON, March 21 (Reuters) - Gold rallied to the
highest level in nearly three weeks on Tuesday after a strong
debate performance from French centrist presidential candidate
Emmanuel Macron and as fading expectations for near-term U.S.
interest rate hikes pushed the dollar lower. 
    The U.S. dollar index        fell to a six-week low while
10-year Treasury yields and U.S. and European shares also
dropped, helping to bolster gold.            
    Spot gold        was up 0.9 percent at $1,244.48 an ounce by
2:50 p.m. EDT (1850 GMT), just off the session high of
$1,247.60, its highest level since March 2. U.S. gold futures
       for April delivery settled up 1 percent at $1,246.50.
    "We're back down below 100 on the dollar index, and that is
tied in with the less aggressive rate hike expectations that we
heard last week from the Fed," Mitsubishi analyst Jonathan
Butler said. 
    The Fed's policy statement last Wednesday was less hawkish
than expected, dampening speculation that the U.S. central bank
would raise interest rates quickly this year.
    Gold is highly sensitive to rising U.S. rates, because they
increase the opportunity cost of holding non-yielding bullion
while boosting the dollar, in which it is priced. Gold fell in
the run-up to the Fed's rate hike last week, with hedge funds
and money managers sharply cut their net long position in COMEX
gold futures.             
    "The funds totally missed the boat ... which means they
could run right back in here," said Bill O'Neill, co-founder of
LOGIC Advisors. "There are a number of things going on
politically that are going to keep the market nervous."
    The euro        rallied after Macron cemented his position
as the front-runner in the French presidential race in the first
televised debate on Monday versus anti-European Union contender
Marine Le Pen.             
    Gold prices were also underpinned by uncertainty over
President Donald Trump's policy direction.
    "The previous two hikes marked cycle lows for gold, and
European election uncertainty, U.S. President Trump's foreign
policies, as well as seasonal demand in India materializing in
April are likely to make Q2 the strongest quarter for gold
prices this year," Standard Chartered said in a note.
    Holdings of the largest gold-backed exchange traded fund,
New York-listed SPDR Gold Shares      , declined for a third
straight day on Monday.
    Meanwhile, data from the Swiss customs bureau showed Hong
Kong's net gold exports to Switzerland hit their highest level
in February since records began five years ago.             
    Silver        was up 0.7 percent at $17.53 an ounce, while
platinum        was 0.1 percent lower at $966.24. 
    Palladium        was up 0.6 percent at $784, after rising to
its highest level in more than a month at $792.90 an ounce.

 (Additional reporting by Nallur Sethuraman in Bengaluru;
Editing by Leslie Adler)