PRECIOUS-Gold firms on political concerns, softer dollar

* Markets brace for first rate hike in 2018 next week

* Mueller investigation adds to U.S. political worries

* SPDR Gold holdings rise 0.5 percent on Thursday

(Recasts, adds quote and updates prices) March 16 (Reuters) - Gold prices edged higher on Friday, supported by a weaker dollar and safe-haven demand amid U.S. political concerns and tensions between the United Kingdom and Russia. However, further gains were capped by expectations that the U.S. Federal Reserve would raise interest rates at its policy meeting next week.

Spot gold was up 0.2 percent at $1,317.97 per ounce

as of 0821 GMT.

U.S. gold futures for April delivery were little

changed at $1,317.80. "As choppier markets seem likely, gold will remain a good hedge against unexpected spikes in equity market volatility and geopolitical tensions, in our view," UBS analysts said in a note. Growing U.S. political uncertainties following the recent departure of two key officials, former Secretary of State Rex Tillerson and top economic advisor Gary Cohn, from the Trump administration have left investors worried. The dollar fell versus the yen on Friday, after a report that U.S. President Donald Trump would remove his national security adviser added to concerns about recent White House personnel changes and what that meant for policy. A weaker dollar makes bullion cheaper for holders of other currencies. Concerns over the investigation into the Trump Organization also tested investor nerves, already frayed by fears U.S. tariffs could hurt the global economy and trigger a trade war.

U.S. Special Counsel Robert Mueller has subpoenaed the Trump Organization for documents, including some related to Russia, the New York Times reported on Thursday. Meanwhile, Moscow said it would retaliate against London's move to expel 23 Russian diplomats over a nerve toxin attack on a Russian former double agent in Britain.

"Bullion continues to search for a catalyst to break out of the recent range, and in lieu of such an event we expect the metal to hold within $1,313 - $1,330, noting any extension lower should meet strong support toward $1,300," MKS PAMP Group trader Sam Laughlin said in a note. The Fed will begin its two-day rate-setting meeting on March 20, at which the U.S. central bank is expected to raise interest rates for the first time this year. "Investors are starting to focus on next week's Fed meeting, which should be constructive for the dollar and bearish for gold," said INTL FCStone. Gold is highly sensitive to rising U.S. interest rates, because it becomes less attractive to investors since it does not bear interest.

Holdings of SPDR Gold Trust , the world's largest

gold-backed exchange-traded fund, rose 0.5 percent from a day earlier to 838.15 tonnes on Thursday, marking the biggest inflow since January.

Meanwhile, silver rose 0.5 percent to $16.45 an


Platinum edged up 0.1 percent to $955.40, while palladium climbed 0.1 percent to $987.00.

(Reporting by Nallur Sethuraman and Arpan Varghese in Bengaluru; editing by Richard Pullin and Subhranshu Sahu)