* All precious metals headed for weekly decline
* Dollar pares gains but still near 3-mnth high
* GRAPHIC-2017 asset returns: http://tmsnrt.rs/2jvdmXl
(Updates on Catalonia independence) LONDON, Oct 27 (Reuters) - Gold edged higher on Friday, reversing earlier losses after the Catalonian parliament's independence declaration from Spain led investors to seek safety from political upheaval. Catalonia's declaration was in defiance of the Madrid government, which was preparing to impose direct rule over the region. Bullion is often used as a safe haven in times of geopolitical and economic uncertainty, while riskier assets such as equities are generally sold off.
Spot gold touched a session high of low of $1,272.80
per ounce, after dipping to its worst in almost three weeks. By 1440 GMT, gold was up 0.2 percent to $1,269.51 but was still heading for its second weekly decline.
U.S. gold futures for December delivery added 0.1
percent to $1,270.80. "Gold went up on the back of the Catalonia independence, but I still think its not going to last long because the dollar is still trading at high levels," said FOREX.com analyst Fawad Razaqzada.
The dollar index eased on a Bloomberg report that
President Donald Trump is leaning toward Federal Reserve Governor Jerome Powell as his pick to head the U.S. central bank. The greenback was however still trading near a three-month high, piling pressure on gold as it makes dollar-priced commodities costlier for non-U.S. investors. According to a Politico report, Trump's search for the next Fed chair has come down to Fed Governor Jerome Powell and Stanford University economist John Taylor. "The market is not pricing in more aggressive rate hike from the Fed even given a potential change in leadership next year. We are likely to see the same rate hike path," ETF Securities commodity strategist Martin Arnold said. Elsewhere, the U.S. House of Representatives helped pave the way on Thursday for deep tax cuts sought by Trump and Republican leaders, underpinning the greenback. Holdings of the world's largest gold-backed exchange-traded
fund, New York-listed SPDR Gold Shares , fell by 1.2 tonnes
on Thursday, data from the fund showed, its first outflow in more than two weeks.
Silver prices shed 0.26 percent to $16.71 per ounce, platinum dipped 0.1 percent to $916.80, while palladium
slipped 0.7 percent to $961.75. All three metals were on track for weekly declines.
(Additional reporting by Arpan Varghese in Bengaluru; Editing