* Dollar trades flat but headed for best week since mid-Feb
* Gold to average $1,259 an ounce this year -GFMS
* Palladium up 17.7 percent this quarter
* GRAPHIC-2017 asset returns: tmsnrt.rs/2jvdmXl
(Updates prices, adds comment, milestones)
By Devika Krishna Kumar and Peter Hobson
NEW YORK/LONDON March 31 Gold notched a
quarterly gain of about 8.4 percent on Friday, marking its best
quarter in a year, as uncertainty over U.S. President Donald
Trump's tax and investment plans and elections in Europe fueled
demand for bullion as a safe haven.
Gold rebounded from early losses as the dollar turned flat
after a Federal Reserve official's seemingly dovish remarks and
uninspiring data on the U.S. economy tamped down the sanguine
mood from earlier this week.
Spot gold was up 0.4 percent at $1,247.4 an ounce at
3:48 p.m EDT (1948 GMT). U.S. gold futures ended the
session 0.2 percent higher at $1247.30 an ounce.
Earlier in the session, gold had dropped by the most in over
than three weeks. It failed to break resistance at its 200-day
moving average, triggering early technical selling.
The dollar index , which tracks the greenback against
six rival currencies, was little changed from its late Thursday
levels at 100.39. Backed by early-week gains, however, it is
headed for its best week since mid-February.
An index of world stocks dipped on Friday as investors
locked in profits, also boosting gold.
Data showing the largest annual increase in U.S. inflation
in nearly five years and comments by the president of the New
York Federal Reserve meanwhile reinforced expectations of U.S.
interest rate hikes this year.
A stronger dollar makes bullion more expensive for holders
of other currencies, while higher interest rates lead to higher
bond yields and dampen demand for non-yielding gold.
But gold is underpinned in the coming months by doubts over
Trump's ability to enact tax cuts and investment spending and an
uncertain political outlook in Europe.
"The fear trade has driven the market so far this year,"
said David Govett at Marex Spectron.
The buying as a haven from risk, plus a recovery in Indian
buying, are likely to push prices to an average $1,259 an ounce
this year, GFMS analysts at Thomson Reuters said in their Gold
Survey 2017, published on Friday.
A failure by Trump to make progress on his stimulus plans
would reduce the chances of a rise in U.S. interest rates in
June, Tom Kendall at ICBC Standard Bank said in a note.
"That in turn would likely give gold the impetus to break up
through $1,300 again," he said.
In other precious metals, spot silver was up 0.7
percent at $18.21 an ounce, taking its gains this quarter to
Platinum was 0.6 percent higher at $948.60 an ounce
and is up about 5 percent this quarter.
Palladium was up 0.2 percent at $795.5 an ounce. The
metal used in catalytic converters that curb pollution from
vehicle exhausts has risen 17.3 percent this quarter.
(Additional reporting by Arpan Varghese in Bengaluru; Editing
by Greg Mahlich and Tom Brown)