* Gold up 1.8 pct in fifth day of gains
* Breaks above technical resistance at $1,245
* Scandals dampen hopes of Trump stimulus
* Dollar falls to lowest since Nov. 9
(Updates prices) LONDON, May 17 (Reuters) - Gold rose to its highest in two weeks as political turmoil and weak economic data in the United States reduced expectations of aggressive interest rate rises this year, pushed down U.S. bond yields and drove the dollar to its lowest in six months. Lower yields reduce the opportunity cost of holding non-yielding gold, while a weaker dollar makes bullion cheaper for non-U.S. investors. Higher interest rates would push yields up and likely boost the dollar.
Spot gold rose for a fifth day and was up 1.8 percent
at $1,258.38 an ounce at 1414 GMT, after hitting $1.259 an ounce, the highest since May 1. It is on track for its biggest rise since June last year.
U.S. gold futures were 1.7 percent higher at
$1,257.80 an ounce. "Downward movement in yields and the dollar have given support to gold," ABN AMRO analyst Georgette Boele said. "And on top of this you get political uncertainty which is denting the dollar." U.S. President Donald Trump is under pressure to explain whether he tried to interfere with a federal investigation after reports that he asked then-FBI Director James Comey to end a probe into his former national security adviser Michael Flynn.
That follows a turbulent week after Trump fired Comey and discussed sensitive national security information with Russia's Foreign Minister. This has led investors to question whether Trump can push through tax cuts and deregulation and fuelled demand for safe-haven assets including gold. The dollar fell to its lowest since Trump was elected in November and is likely to drop further, Boele said. Stocks fell and ten-year U.S. bond yields were at the lowest level since April 21. An unexpected fall in U.S. homebuilding meanwhile added to a run of weak economic data, raising new doubts about how many times the Federal Reserve will raise interest rates this year.
Futures traders are pricing in a 66 percent chance of a June rate rise, down from around 90 percent earlier this month, according to CME's FedWatch Tool. On the technical side, gold broke above resistance at its 200-day moving average and Fibonacci retracement, both at around $1,245, triggering technical buying. If gold can hold above that level it could rise to its long-term downtrend line at $1,287 an ounce, said technical analysts at Commerzbank. Gold imports to major consumer India will however drop back sharply later in the year following a strong first quarter, the World Gold Council said on Wednesday.
Silver was 1.1 percent up at $17.01 an ounce and platinum was 1 percent higher at $946.70 an ounce. Palladium was down 1.7 percent at $780.20.
(Additional reporting by Vijaykumar Vedala and Swati Verma in Bengaluru, editing by Ed Osmond and Susan Thomas)