* Gold surges after U.S. data to highest since July 3
* Funds pull back in silver while ETF investors keep buying
* Palladium climbs 3 pct this week (New throughout with updated prices, comments; adds byline, NEW YORK dateline)
By Chris Prentice and Eric Onstad
NEW YORK/LONDON, July 14 (Reuters) - Gold prices jumped 1.4 percent to the highest level in nearly two weeks on Friday after data pointed to weak U.S. inflation, reaffirming doubts that the U.S. central bank would again hike interest rates this year.
U.S. consumer prices were unchanged in June and retail sales fell for a second straight month. Bond yields dipped and the dollar index .DXY slid to their lowest level since September 2016 after the weaker-than-expected figures. FRX/
Spot gold XAU= gained 0.96 pct at $1,228.61 per ounce by 3:01 p.m. EDT (1901 GMT) after hitting $1,232.76. It was poised for a weekly gain of 1.3 percent, the biggest since mid-May.
The U.S. data bolstered expectations that the U.S. Federal Reserve would likely to move slowly to continue raising interest rates in the absence of inflation signs. Some had been expecting another rate hike in 2017.
Fed Chair Janet Yellen's comments to the U.S. Congress this week "were more dovish than originally anticipated," said David Meger, director of metals trading for High Ridge Futures in Chicago.
Friday's "data reaffirms the delay," he said. "We're seeing precious (prices) buoyed on the back of that."
The most-active U.S. gold futures GCcv1 for August delivery futures settled up $10.20, or 0.84 percent, at $1,227.50 per ounce. The contract finished the week up 1.5 percent, its first gain in six weeks.
The weaker greenback boosted gold, making the dollar-priced commodity cheaper for investors holding other currencies.
Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen, said the chart picture had been damaged last week when gold broke below its May lows, but bullion was now fighting back.
"The key level is $1,230 on gold. In order to turn neutral again we need to move back above that level," he said.
Meanwhile, holdings at the SPDR Gold Trust GLD , the world's largest gold-backed exchange-traded fund fell 0.43 percent to 828.84 tonnes on Thursday from 832.39 tonnes on Wednesday.
Silver prices XAG= rose 1.79 pct at $15.94 per ounce, heading toward a weekly gain of 2.3 percent.
In silver, there was a sharp split between funds, which had largely sold off their record long position, and ETF investors, who had been recently buying, Hansen said.
"A move above $16.20 could trigger quite a bit of accelerated buying from the funds," he said.
Palladium XPD= gained 0.81 percent at $858.65 per ounce and was set to end the week 2.4 percent higher. Platinum XPT= rose 1.68 percent at $916.65 per ounce, set to end the week up 1.5 percent.