* Gold hits highest since May 1 at $1,265.04/oz
* European stocks slide another 1 pct on Trump fears
* GRAPHIC-2017 asset returns: http://tmsnrt.rs/2jvdmXl
(Updates throughout, adds LONDON dateline) LONDON, May 18 (Reuters) - Gold extended its biggest one-day rally in nearly a year on Thursday to a more than two-week high, as uncertainty over the outlook for Donald Trump's presidency rattled stock markets, prompting a wave of risk aversion. Gold surged nearly 2 percent on Wednesday, its biggest one-day jump since Britain voted to exit the European Union in June, on reports that U.S. President 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 versus the Japanese yen.
Spot gold was up 0.2 percent at $1,263.06 an ounce at 1102 GMT, while U.S. gold futures for June delivery were
up $4.20 an ounce at $1,262.90. Earlier it hit its highest since May 1 at $1,265.04. "This is related to a flare-up of geopolitical risks with what's happening in the U.S. with Trump and Russian implications," Capital Economics analyst Simona Gambarini said. "That's what's been giving it a boost." The latest reports on Trump came after a turbulent week when the president fired FBI Director James Comey and discussed sensitive national security information with Russia's foreign minister, causing investors to question whether he can deliver pledges on 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 Trump's 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. The dollar steadied on Thursday but wallowed near six-month lows against a basket of its peers, struggling to recover from its worst losses in almost a year against the yen and the euro. European stocks fell another 1 percent. "The U.S. dollar is tending towards weakness due to the political chaos in the United States and the increasingly frequent scandalous reports about U.S. president Trump," Commerzbank said in a note. "As a result, risk aversion has also risen noticeably." "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. What is more, it exceeded the technically important 200-day moving average yesterday, which lent it additional buoyancy."
Among other precious metals, silver was down 0.4 percent at $16.79 an ounce, while platinum was down 0.8 percent at $934.80 an ounce and palladium was 2.1 percent
lower at $765.43.
(Additional reporting by Vijaykumar Vedala in Bengaluru, editing by Ed Osmond)