PRECIOUS-Gold hits 3-1/2-month high as Trump inflation trade fades

    * Dollar hits one week low then pares losses
    * Silver on track for ninth straight weekly gain
    * Platinum hits highest in nearly 5 months
    * Graphic: Asset returns in 2017:

 (Updates prices; adds comment, second byline, NEW YORK
    By Marcy Nicholson and Maytaal Angel
    NEW YORK/LONDON, Feb 24 (Reuters) - Gold reached its highest
in 3-1/2 months on Friday as the dollar fell to a one-week low
after the new U.S. Treasury chief poured cold water on the
"Trumpflation trade" that had boosted the greenback this year.
    Treasury Secretary Steven Mnuchin said on Thursday that any
steps U.S. President Donald Trump's administration takes on
policy would probably have only limited impact this year, 
though he wants to see tax reform passed by August.            
    The comments suggested much work was still needed on the
sweeping tax plan that Mnuchin called his main priority, and
which investors had bet would stoke growth and inflation this
    "We've got a vacuum of (U.S. domestic) policy, real
(interest) rates going down, the dollar going sideways and
geopolitical (jitters) around the world ... all helping gold,"
ICBC Standard Bank analyst Tom Kendall said.
    "There is apparently a move of institutional investor money
into gold and there are usually very good reasons for that."    
    Spot gold        was up 0.6 percent at $1,256.75 an ounce by
2:26 p.m. EST (1926 GMT), having touched its highest since Nov.
11 at $1,260.10 earlier, zeroing in on the 200-day moving
average. It was on track to finish the week higher for the
fourth straight week.
    U.S. gold futures         settled up 0.55 percent at
    Tempering gains in bullion, a poll on Friday suggested
French presidential candidate Emmanuel Macron would beat
far-right leader Marine Le Pen, who has promised a referendum on
European Union membership.             
    Key global stock markets fell as investors scaled back bets
that Trump's policies would benefit economic growth. The dollar
later pared losses.                   
    Holdings of the largest gold-backed exchange-traded fund,
New York's SPDR Gold Trust                , have risen more than
5 percent this month on geopolitical risk.
    "These dollar-denominated and perceived safe-haven precious
metals have risen during a time when Wall Street has repeatedly
hit new all-time highs and despite the dollar holding near its
multi-year highs," said Fawad Razaqzada, technical analyst for, adding that precious metals appeared poised to rise
further in the coming weeks.
    "The metals' remarkable performance may suggest that
investors are positioning themselves up for a major risk-off
event – such as a collapse in the US stock markets."
    Silver        rose 0.8 percent to $18.30 per ounce, having
touched its highest in 3-1/2-months at $18.40. Silver has gained
about 1.8 percent this week in what could be its ninth straight
weekly gain.
    Platinum        rose 1.8 percent to $1,023.75 per ounce,
after hitting its highest since early October at $1,028.60.
Palladium        fell 0.7 percent to $767.25.

 (Additional reporting by Arpan Varghese and N R Sethuraman in
Bengaluru; Editing by Susan Fenton and Chizu Nomiyama)