* Spot gold may test resistance at $1,250 per ounce - technicals
* Dollar index close to lowest since August 2016
(Adds comment, updates prices) BENGALURU, July 21 (Reuters) - Gold held steady on Friday near a three-week high and was on track for a second consecutive weekly gain, underpinned by a weaker dollar and U.S. political uncertainty. Heightened political concerns surrounding investigations into President Donald Trump's campaign ties with Russia are currently the key driver supporting gold prices, said Stephen Innes, head of trading for Asia Pacific at OANDA in Singapore. The euro also held near two-year highs against the dollar on Friday after the head of the European Central Bank said tapering of its stimulus will be on the table this autumn. A weaker dollar makes U.S. dollar denominated gold more attractive for buyers using other currencies.
Spot gold rose 0.1 percent to $1,245.01 per ounce at
0401 GMT after touching a three-week high of $1,247.48 an ounce in the previous session. It is up about 1.4 percent for the week so far.
U.S. gold futures for August delivery fell 0.1
percent to $1,244.70 per ounce. "What we're seeing right now is the overhang from political risks in the United States," Innes said. The Republican Party's repeated failures to overhaul the healthcare system and multiple congressional and federal investigations into President Donald Trump's campaign's ties to Russia have cast a shadow over his first six months in office. The ECB left its ultra easy monetary policy unchanged on Thursday and did not even discuss clawing back stimulus, suggesting it may delay an inevitable decision on tapering bond buys until the latest possible moment. Spot gold may test a resistance at $1,250 per ounce, a break above which could lead to a further gain to $1,261, according to Reuters technical analyst, Wang Tao. "The gold-silver ratio closed slightly lower today, at 76.05," said analysts at ScotiaMocatta, adding that "resistance is at 77.92, the recent high and support is at 74.82."
Among other precious metals, silver fell 0.1 percent
to $16.28 per ounce after touching $16.42 in the previous session, the highest since July 3.
Platinum fell 0.4 percent to $922.49 per ounce but
was up about 1 percent for the week.
Palladium rose 0.4 percent to $845.65 an ounce but
was down around 1.4 percent for the week.
(Reporting by Nithin Prasad in Bengaluru; Editing by Richard Pullin)