PRECIOUS-Gold hits 3-week high as dollar slides to lowest since 2014

    * Spot gold climbs 3.2 pct this week as dollar slides
    * Price gains more muted in euro-, sterling-priced gold
    * GRAPHIC-2018 asset returns:

 (Updates throughout, adds LONDON dateline)
    By Jan Harvey
    LONDON, Feb 16 (Reuters) - Gold rose to a three-week high on
Friday as the dollar index slid to a three-year low and
stronger-than-expected inflation data this week boosted interest
in the metal as a hedge against price pressures. 
    Gold is holding on track for its biggest weekly gain in
nearly two years, snapping two straight weeks of losses that
pulled it back from last month's 1-1/2 year peak. 
    Spot gold        was up 0.4 percent at $1,358.83 an ounce at
1030 GMT, while U.S. gold futures        for April delivery were
up $6.40 an ounce at $1,361.70. 
    "We're looking for the dollar to keep weakening. For me
that's the key thing to watch for gold," Oxford Economics'
director of commodity services Daniel Smith said. "Gold tends to
do particularly well in that kind of environment."
    Signs of rising inflation were also helping drive the metal
higher, he said. "If inflation expectations rise faster than
nominal rate expectations, then this should add fuel to the
fire, particularly in an environment of U.S. dollar weakness." 
    Spot gold has risen 3.2 percent so far this week, putting it
on track for its biggest weekly rise since April 2016. Gold has
fared less well in other currencies, rising 1 percent in euro
terms and 1.5 percent in sterling. 
    The dollar hit a three-year low versus a currency basket on
Friday, hurt by concerns that Washington might pursue a weak
dollar strategy and the perceived erosion of its yield advantage
as other countries consider tighter monetary policy.       
    Data this week showed U.S. producer prices accelerated in
January, while initial claims for state unemployment benefits
increased in the week ended Feb. 10.
    "Rising inflation, coupled with slightly weaker U.S. growth
readings and a struggling dollar should continue to provide gold
with an element of support," INTL FCStone said in a note.
    On the physical side of the market, demand in Asia was muted
by the Lunar New Year holiday, closing markets in major consumer
China, as well as in South Korea, Malaysia and Vietnam. 
    In India, physical gold was sold at a discount for the first
time in three weeks as demand slumped due to a jump in local
rates. Gold in rupee terms         hit a 15-month high of 30,836
rupees on Friday.         
    Among other precious metals, silver        was up 0.1
percent at $16.89. Platinum        was 0.8 percent higher at
$1,009, after hitting its highest since Jan. 29 at $1,012.70.
    Palladium        was up 0.8 percent at $1,025.55. The metal
has risen 5.3 percent so far this week, its best since October. 

 (Additional reporting by Eileen Soreng in Bengaluru; Editing by
Edmund Blair)