* Gold hits highest since May 1 at $1,265.04/oz
* Dollar bounces back after jobs and Philly Fed data
* European shares fall on Trump fears
* GRAPHIC-2017 asset returns: http://tmsnrt.rs/2jvdmXl
(Releads, updates prices, adds comment) LONDON, May 18 (Reuters) - Gold eased on Thursday as a bounce in the dollar prompted some buyers to cash in gains after its biggest one-day rally in nearly a year, though uncertainty over the outlook for the Trump presidency underpinned the metal near two-week highs. Gold surged nearly 2 percent on Wednesday, its biggest one-day jump since Britain's June vote to leave the European Union, on reports that U.S. President Donald Trump had tried to intervene in an investigation into alleged Russian interference in last year's U.S. election. That prompted the sharpest drop in Wall Street stocks since Sept. 9 and knocked the dollar nearly 2 percent lower against the yen. The U.S. currency bounded back on Thursday, however, after stronger than expected jobs and business conditions data.
Spot gold was down 0.1 percent at $1,258.75 an ounce
at 1320 GMT, having touched its highest since May 1 at
$1,265.04. U.S. gold futures for June delivery were flat
at $1,258.70. "(Gold) is seeing a pullback after yesterday's strong performance -- it needs to take a breather," said Heraeus precious metals trader Alexander Zumpfe. "It ran into resistance towards $1,260." Nonetheless, sentiment has turned more positive and technical indicators are looking promising, he added. "Stock markets (are) also looking bit vulnerable. That helps," he said. European shares were down 0.8 percent on Thursday, while world stocks extend their steepest fall in more than six months. A sell-off in U.S. stocks looked set to extend into a second day as a series of scandals cast a shadow over Trump's presidency and the future of his pro-growth agenda. The latest reports on Trump came after a turbulent week in which he fired FBI Director James Comey and discussed sensitive national security information with Russia's foreign minister, causing investors to question whether he can deliver on pledged tax cuts and deregulation.
Current and former U.S. officials familiar with the exchanges told Reuters on Thursday that Michael Flynn and other advisers to the Trump campaign were in contact with Russian officials and others with Kremlin ties in at least 18 calls and emails during the last seven months of the 2016 presidential race. Risk aversion has risen noticeably because of the political situation in the United States, Commerzbank said in a note. "Gold is profiting from this confusion and has climbed this morning to a 2-1/2 week high of over $1,260 per troy ounce," it said. "What is more, it exceeded the technically important 200-day moving average yesterday, which lent additional buoyancy."
In other precious metals, silver slipped by 0.6 percent to $16.75 an ounce, platinum was down 0.9 percent at $933.24 and palladium fell by 2 percent to $766.25.
(Additional reporting by Vijaykumar Vedala in Bengaluru; Editing by Ed Osmond and David Goodman)