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By Devika Krishna Kumar and Eric Onstad
NEW YORK/LONDON, Feb 17 (Reuters) - Gold prices eased on Friday but notched a weekly gain as investors opted for the safe-haven qualities of bullion due to uncertainty about U.S. and European politics as well as the direction of stock markets.
Global equity markets lost momentum after setting record highs in the previous two sessions, partly due to disquiet about the policies of U.S. President Donald Trump.
"Gold is close to its recent multimonth high despite the strong dollar, due to an increase in volatility on the equity markets and more uneasiness on the political front, which is supporting the search for safe-haven assets," said Eugen Weinberg, head of commodity research at Commerzbank.
Spot gold was 0.14 percent lower at $1,237 per ounce by 2:44 p.m. EST (1944 GMT), while U.S. gold futures ended the session down 0.2 percent at $1,239.10.
Concern over Trump's policies, as well as elections in the Netherlands, France and Germany this year, fueled gold's rise to a peak of $1,244.67 on Feb. 8, the strongest in nearly three months.
Gold, on track for a third week of gains, has risen nearly 8 percent in 2017. Early in the week, gold prices fell after Fed Chair Janet Yellen said U.S. interest rates may need to be raised in March.
"On balance, we still don't think that the Fed will raise interest rates at the March FOMC meeting, but the 0.6 percent month-on-month surge in consumer prices in January could prompt the Fed to move sooner than we anticipate," Capital Economics analysts said in a note.
Gold prices recovered by Wednesday after strong U.S. data showed U.S. inflation was picking up.
Bullion is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.
The dollar index
Holdings of SPDR Gold, the world's largest gold-backed exchange-traded fund (ETF), have risen 5.6 percent so far this month, the most since June 2016.
"The market seems to be quite supported by investment inflows into the ETFs and I think this will be the most important factor through the year as we expect investors to keep pouring money into gold ETFs," Weinberg added.
Commerzbank expects gold to hit $1,300 by year end.
Spot silver fell 0.3 percent to $18.03 an ounce. The metal hit its strongest since Nov. 11 at $18.13 in the previous session.
Platinum dropped 0.7 percent to $1,004.60.
Palladium declined 1.8 percent to $778.22. The metal, used in emission-controlling catalytic converters for the automotive industry, touched its best since Jan. 24 at $795.10 during the prior session. It has gained about 15 percent so far this year.
(Additional reporting by Nallur Sethuraman in Bengaluru; Editing by David Evans and Lisa Shumaker) ((devika.kumar@thomsonreuters.com; +1 646 223 6059; Reuters Messaging: devika.kumar.thomsonreuters.com@reuters.net))
