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PRECIOUS-Gold hits 1-week high on weaker dollar, rate hike prospects

* Physical holdings in gold ETFs fall since Fed rate rise

* Gold resistance at $1,260/oz, 55-day moving average

* Hold off on further rate hikes until inflation moves -Fed's Bullard

(Adds comments, latest from Fed, updates prices, weekly milestone, adds NEW YORK dateline) NEW YORK/LONDON, June 23 (Reuters) - Gold prices climbed to one-week highs on Friday, boosted by a weaker dollar, economic and political uncertainty around the world, as well as the limited prospect of further interest rate rises in the United States. The Federal Reserve should wait on any further rate increases until it is clear inflation is reliably heading to the Fed's 2 percent target, St. Louis Fed President James Bullard said on Friday, highlighting the central bank's struggle over how to weigh a recent slip in the rate of price increases. However, Bullard does not currently vote on the Fed's policy-setting committee.

Spot gold was up 0.44 percent at $1,255.7 an ounce by

2:04 p.m. EDT (1804 GMT) after earlier touching a session high

at $1,258.81. U.S. gold futures rose 0.6 percent to

settle at $1,256.4. Prices were on track for their first weekly percentage gain in three weeks. "Gold finally made an effective stand this week after a fortnight of declines and may have established a short term bottom at $1,240," said Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York. "Looking ahead, market will parse Chair (Janet) Yellen next week to see if she makes any notable changes to the Fed's stance since the June meeting." Allegations of ties to Russia have cast a shadow over U.S. President Donald Trump's first five months in office, North Korea testing a rocket engine and Brexit negotiations are all fueling concern about global stability. "Political noise out of Washington regarding Trump's ties with Russia is unlikely to provide lasting support to gold while an escalation of the geopolitical tensions with North Korea is a bullish wild card," Julius Baer analysts said in a note. The dollar fell against a basket of major currencies on

Friday , on track for its biggest single-day drop in three

weeks, on persistent doubts whether the Fed would raise interest rates again this year due to softening inflation data.

Further pressuring the dollar was Markit's flash June reports on U.S. factory and services activity, which was weaker than expected, while the government said new home sales rebounded more than expected in May. Gold is often used by investors as a hedge against political and financial uncertainty. But it doesn't earn interest, dividends or coupons and it costs money to insure and store. A rising U.S. currency makes dollar-denominated metals more expensive for holders of other currencies, which potentially could subdue demand. The Fed's rate rise on June 14 saw investors sell gold. Holdings of the largest gold-backed exchange-traded-fund (ETF),

New York's SPDR Gold Trust , have fallen to 27.456 million

ounces from 27.875 million ounces on June 13. On the technical side, the first upside barrier comes in around $1,260 near the 55-day moving average. That is followed moving average at $1,249 provides strong support.

Elsewhere, silver gained 1.1 percent to $16.71 an ounce, platinum rose 0.9 percent to $929.25 and palladium

fell 2.8 percent to $858.08 an ounce.

(Additional reporting by Nithin Prasad and Vijaykumar Vedala in Bengaluru; Editing by David Evans and Lisa Shumaker)