* Gold set for best weekly gain since October
* European shares subdued, dollar flat
* Chinese premiums and buying ease but still robust
(Recasts throughout; changes dateline, previous SINGAPORE)
LONDON, Jan 3 (Reuters) - Gold rose to a two-week high on Friday, as traders returned to the market after prices plunged to a six-month low and as weaker equities spurred demand for the metal as a safe-haven asset.
The yellow metal, headed for its best weekly performance since October after posting its largest annual decline in 32 years, took some support from strong Chinese physical demand.
Other precious metals followed suit, with platinum touching a six-week high and palladium climbing to a three-week high, heading for its biggest weekly gain since October.
"The attempted sell-off (on Tuesday) through the $1,184 level...didn't really trigger any follow-through selling (and) gave some potential buyers the confidence to move back in," said Ole Hansen, head of commodity strategy at Saxo Bank.
Spot gold was up 0.7 percent to $1,233.26 an ounce by 1052 GMT after hitting $1,238.70 earlier - its highest since Dec. 18. It was on course for a 1.6 percent weekly gain.
U.S. gold futures for February delivery rose 0.6 percent to $1,232.80 an ounce.
Gold's gains came after it lost nearly 30 percent in 2013, ending a 12-year bull run, largely due to the U.S. Federal Reserve's plans to unwind its monetary stimulus programme.
Analysts, however, cautioned that the upward momentum in the early days of the new year may only last a few weeks due to some index rebalancing activity, but the metal could record another drop in value in 2014.
"It's probably too early to say that we've seen the lows," Hansen added.
"We need to make a solid move back above the $1,270 area to really rattle the cage, because that would take us above the recent highs and would signal a break of this downtrend that we've had since 2012."
Years of quantitative easing by the U.S. central bank have been a boon for gold by holding down interest rates and stoking inflation fears. But with an improving U.S. labour market and other positive signs in the economy, the Fed decided to scale back the stimulus, hurting gold's appeal.
Gold gained as equity markets were subdued on Friday, while the dollar was flat against a basket of main currencies. Broad risk aversion in the markets was generally benefiting traditional safe haven investments such as gold, bonds and the Japanese currency.
"Positive bullion prices in reaction to the decline in equities may set the tone for 2014 and reinforce the negative correlation between the two," HSBC analysts said in a note.
Premiums on the Shanghai Gold Exchange showed that Chinese buying has picked up in recent days as global prices hovered around $1,200 towards the end of 2013.
The buying pace dropped slightly after Thursday's rally.
Premiums to London prices for 99.99 percent purity gold dropped to about $17 an ounce on Friday after climbing to $25 earlier this week.
Chinese demand is likely to stay strong in the build up to the Lunar New Year on Jan. 31, when gold is traditionally given as a gift, said Chen Min, an analyst at Jinrui Futures in Shenzhen.
Silver hit a 2-1/2 week high of $20.25 an ounce.
Platinum rose to a six-week high of $1,410.50 an ounce and palladium notched a 0.3 percent gain to $728.50 an ounce.
(Additional reporting by A. Ananthalakshmi in Singapore; Editing by William Hardy)