PRECIOUS-Gold set for weekly gains amid geopolitical uncertainty

Updates with mid-session trading

By Anushree Mukherjee

Dec 27 (Reuters) - Gold prices eased on Friday but were set for a weekly gain as investors gravitated towards safe-haven assets amid political uncertainty in the Middle East, overshadowing pressure from a firmer dollar.

Spot gold XAU= was down 0.3% to $2,626.52 per ounce as of 1255 GMT. Bullion has gained 0.2% so far this week. U.S. gold futures GCv1 were down 0.5% to $2,642.00.

"There remain geopolitical hotspots around the globe, which is keeping gold in play from a safe-haven perspective," said Tim Waterer, chief market analyst at KCM Trade.

"Between Russia-Ukraine and events in Gaza, investors remain keen on gold in case either situation flares up further."

In the Middle East, Israel struck multiple targets linked to the Iran-aligned Houthi movement in Yemen on Thursday.

While, Russian drones struck a multi-storey apartment building on Thursday in the front line town of Chasiv Yar in the Donetsk region of Ukraine.

Limiting further gains in gold, the dollar index .DXY headed for a fourth straight week of gains. A stronger dollar makes bullion more expensive for other currency holders. USD/

Gold has gained around 28% so far this year, hitting a record high of $2,790.15 on Oct. 31 on the back of the Fed's rate easing and escalated tensions around the globe.

Following rate cuts in September and November, the Fed continued with its easing policy in December. However, it also hinted at the possibility of fewer reductions in 2025. FEDWATCH

As President-elect Donald Trump is set to return to the White House in January, markets are bracing for substantial policy shifts, encompassing tariffs, deregulation, and tax amendments.

Gold typically performs well during times of economic and geopolitical uncertainty and thrives in a lower interest rate environment.

Elsewhere, gold discounts in India widened to a nearly three-month high as rising prices dampened demand, while China shifted to premium. GOL/AS

Spot silver XAG= fell 0.8% to $29.55 per ounce, platinum XPT= lost 0.1% to $935.35, both metals were on track of weekly gains. Palladium XPD= shed 0.5% to $920.65.

(Reporting by Anushree Mukherjee in Bengaluru; editing by Jason Neely and Sharon Singleton)

((anushree.ashishMukherjee@thomsonreuters.com;))