* Dollar index hits lowest since Sept. 2017 on Friday
* Silver heading for first weekly drop in five weeks
* Platinum hits 4-month high, heading for 5th straight
weekly gain
(Adds comments)
By Sethuraman N R
Jan 12 (Reuters) - Gold prices rose for a third straight
session on Friday to their highest since September as the
slumping dollar drew investors to buy the yellow metal. Bullion
is on track for its fifth weekly gain.
Spot gold edged up 0.3 percent to $1,326.68 an ounce
by 0318 GMT. Prices rose their highest since Sept. 15, 2017, at
$1,327. Gold is up 0.5 percent for the week so far and the
streak of weekly gains is the most since the week ending April
14.
U.S. gold futures were up 0.3 percent at $1,326.90
an ounce.
The dollar index , which measures the greenback
against six rival currencies, fell to its lowest since Sept. 20,
2017, at 91.689.
The euro jumped against the dollar as the European Central
Bank signalled it could begin to wind down its 2.5 trillion euro
($3.01 trillion) stimulus program this year.
A stronger euro potentially boosts demand for gold by making
dollar-priced bullion cheaper for European investors.
"There is a lot of doubt on how long prices have run from
here ... Prices have only risen despite the Fed raising interest
rates and main driver has been the U.S. dollar, which we
continue to see help gold run higher in the first quarter," said
Brian Lan, managing director at dealer GoldSilver Central in
Singapore.
"Gold has to breach the recent high of $1,327, above which
prices can touch $1,360."
Spot gold is expected to test a resistance at $1,329 per
ounce, with a good chance of breaking above this level and
rising more to the next resistance at $1,341, according to
Reuters technical analyst Wang Tao.
The greenback was also under pressure after data showed
producer prices in the United States fell for the first time in
nearly 1-1/2 years in December amid declining costs for
services.
Weak inflation at the producer level could add to concerns
that the factors restraining inflation could become more
persistent and result in the U.S. Federal Reserve being more
cautious about raising interest rates this year.
Higher rates could dent demand for non-interest-paying gold.
Investors will be watching the U.S. Consumer Price Index
(CPI) data due later on Friday, which is expected to show
inflation likely increased 0.2 percent in December after rising
0.4 percent in November.
Among other precious metals, spot silver rose 0.7
percent to $17.06 an ounce. Silver is on track for its first
weekly loss in five weeks. It was down about 1 percent so far
this week.
Platinum rose 0.5 percent to touch its highest since
Sept. 12 at $990.20 an ounce. Platinum was on track for its
fifth straight weekly gain. It has risen 1.7 percent so far this
week.
Palladium was up 0.4 percent at $1,087.95 an ounce,
after dropping to a more than one-week low at $1,075.50 on
Thursday.
(Reporting by Nallur Sethuraman in Bengaluru; Editing by Biju
Dwarakanath)
