PRECIOUS-Gold rises as dollar retreats after Fed downplays inflation fears

* Palladium heads for second straight weekly decline

* Gold eyes second straight weekly gain (Adds comments, updates prices)

May 14 (Reuters) - Gold rose on Friday, as the dollar pulled back from one-week highs after U.S. Federal Reserve officials downplayed an imminent rise in interest rates despite a sharp rise in inflation.

Spot gold gained 0.5% at $1,835.11 per ounce by 1158 GMT. U.S. gold futures rose 0.6% to $1,835.30.

The dollar index was down 0.3% against its rivals, making gold cheaper for other holders of other currencies.

“The Fed is not going to throw the economic recovery off course by raising rates,” StoneX analyst Rhona O’Connell said. “There’s too much risk involved to start either aggressive tapering or raising rates because there is not enough underlying strength in the economy.”

“We have got global issues, and particularly with uncertainties over places like Brazil and India.”

India’s tally of coronavirus infections climbed past 24 million on Friday, amid reports that the highly transmissible variant was spreading across the globe.

Key U.S. economic readings this week showed a bigger-than-expected rise in consumer prices and weekly jobless claims dropping to a 14-month low, intensifying concerns over rising inflation and prospects of a rise in interest rates.

Federal Reserve officials have repeatedly maintained they expect any rise in inflation to be short-lived.

Fed Governor Christopher Waller on Thursday said the Fed would not move to raise rates until inflation is above target for a long time, or excessively high. Meanwhile, Richmond Fed President Thomas Barkin also downplayed the likelihood of a long-term jump in inflation.

If the Fed sticks to its guns and the initial Fed comments following publication of the data suggest that is exactly what it intends to do, gold prices are likely to be pushed up again, Commerzbank analysts wrote in a note.

Elsewhere, palladium gained 1.7% at $2,911.55 per ounce. Silver rose 0.8% to $27.28 and platinum was up 1.7% at $1,226.61.

Reporting by Nallur Sethuraman in Bengaluru; Editing by Amy Caren Daniel