* Gold heads for 0.5 percent weekly increase
* Platinum poised for 3 pct weekly rise, biggest since Feb
(Updates throughout, changes dateline from SINGAPORE)
LONDON, May 16 (Reuters) - Gold struggled below $1,300 an ounce on Friday, as data indicating brighter prospects for the U.S. economy reinforced views that the Federal Reserve will maintain its pace of stimulus tapering.
Platinum was headed for its biggest weekly gain in three months on supply worries due to prolonged strikes in top producer South Africa, while palladium was poised for a weekly increase of around 1 percent.
Spot gold eased 0.1 percent to $1,294.70 an ounce by 1001 GMT, while U.S. gold futures rose 0.1 percent to $1,294.80 an ounce.
"Gold is still stuck in a narrow range because the downside is limited by geopolitical concerns and the upside is capped by generally good U.S. data, which suggest the Fed will carry on with the current pace of stimulus tapering," VTB Capital analyst Andrey Kryuchenkov said.
"You have one central bank reducing its quantitative easing when the ECB (European Central Bank) does the opposite," he added. "From the simple perspective of the dollar, it should be relatively strong."
The dollar held steady against a basket of currencies, while U.S. 10-year Treasury yields stood flat at 2.5 percent. Returns from U.S. bonds are closely watched by the gold market, given that the metal pays no interest.
Data on Wednesday showed that new applications for U.S. unemployment benefits hit a seven-year low last week, while consumer prices recorded their largest increase in 10 months in April. U.S. industrial output, however, fell at its fastest rate in more than 1-1/2 years in April as factory production slumped.
The metal was still up 0.5 percent for the week on earlier gains from political uncertainty in Ukraine that has increased tensions between Russia and the West.
Gold is often seen as an insurance investment against financial or political troubles.
"Despite Thursday's modest selloff in gold, we remain constructive on the precious metal short-term, as there are too many geopolitical hot spots that still have the capacity to flare up rather unexpectedly," INTL FCStone said in a note.
Investor interest perked up as SPDR Gold Trust, the world's biggest gold-backed exchange-traded fund, showed a modest increase in flows. Holdings in the fund rose 1.79 tonnes to 782.25 tonnes on Thursday - the first inflow in a month.
Data showed that hedge fund Paulson & Co, the largest institutional investor in SPDR, kept its stake in the fund unchanged in the first quarter as bullion prices rebounded from their biggest annual loss in 32 years in 2013.
As for other precious metals, platinum producer Lonmin said on Thursday it might go to court in an attempt to stop a 16-week strike because of the levels of violence faced by workers who want to return to work.
The stoppage has hit about 40 percent of global production of the metal used for emissions-capping catalytic converters in automobiles, with about 880,000 ounces lost to date, according to Reuters calculations.
Platinum was up 0.1 percent at $1,464.70 an ounce after rising to $1,483.50 on Wednesday, while palladium was unchanged at $810.00 an ounce but still near its 2-1/2-year peak of $827.50 set earlier in the week.
Spot silver fell 0.4 percent to $19.39 an ounce.
(Additional reporting by A. Ananthalakshmi in Singapore; Editing by Dale Hudson)