PRECIOUS-Gold inches back toward 17-month peak as dollar moves lower

    * Spot gold set for sixth weekly gain in seven weeks
    * Dollar resumes decline after late Thursday bounce
    * GRAPHIC-2018 asset returns:

 (New throughout, updates prices, market activity and comments;
adds second byline and NEW YORK dateline)
    By Renita D. Young and Jan Harvey
    NEW YORK/LONDON, Jan 26 (Reuters) - Gold rose on Friday,
climbing back toward the previous day's 17-month peak as a
report of slow economic growth pushed the U.S. dollar lower,
days after the greenback was hammered by a senior U.S. official
backing a weaker currency.
    The dollar was on track for its biggest weekly decline since
May. President Donald Trump's comments on Thursday that he
wanted a "strong dollar" failed to lend much support, a day
after Treasury Secretary Steven Mnuchin said a weaker greenback
would help short-term U.S. trade balances.       
    Spot gold        was up 0.3 percent at $1,351.86 by 1:37
p.m. EST (1837 GMT), up 1.5 percent this week. On Thursday,
bullion hit $1,366.07, its highest since August 2016.
    U.S. gold futures         for February delivery settled down
$10.80, or 0.78 percent, at $1,352.10 per ounce. 
    "The dollar is weak, driving gold higher. Gold is still in
an uptrend," said Michael Matousek, head trader at U.S. Global
Investors in San Antonio.
    Dollar weakness makes assets priced in the U.S. unit less
expensive for holders of other currencies.
    The U.S. economy grew 2.6 percent in the final quarter of
2017, slower than the 3 percent forecast by economists polled by
    "GDP is light so there’s a question as to whether the Fed
will do so many rate hikes throughout the year and that tends to
drive gold higher," Matousek added.
    Higher yields on bonds make gold investment less attractive
because gold pays no interest.  
    World stocks were set for their 10th straight week of gains.
    Gold could benefit if that scorching run cools, Thomson
Reuters GFMS analysts said, predicting volatility in equities
and concerns over global politics could lead gold prices up past
$1,500 an ounce this year.             
    Among other precious metals, silver        was up 0.7
percent at $17.42 an ounce. On Thursday, silver touched $17.69,
its highest in more than four months. It was strongest weekly
rise among precious metals, up 2.4 percent from last Friday's
    "The U.S. dollar remains in the driving seat of the metal
markets, causing a lot of volatility for silver," Julius Baer
said in a note. "We remain neutral but lift our 12-month price
target to $17.50 per ounce due to signs of improving industrial
    Platinum        was up 0.4 percent at $1,014.40 an ounce,
flat from last week. Palladium        was down 0.7 percent at
$1,088.47 an ounce. After recently hitting record highs,
palladium was on track for its second weekly loss. It hit a
two-week low of $1,080 per ounce. 

 (Additional reporting by Nallur Sethuraman in Bengaluru;
Editing by David Gregorio)