Corrected: Gold hits 4-month peak after U.S. welcomes weaker dollar

(Corrects to read 4-month, four months in headline, paragraph 1)

By Eric Onstad

LONDON (Reuters) - Gold prices hit the highest in more than four months on Wednesday after a U.S. official welcomed a weaker dollar and investors sought insurance against uncertainty.

The dollar index touched fresh three-year lows after U.S. Treasury Secretary Steven Mnuchin said a softer dollar was good for the United States.

A decline in the dollar makes commodities priced in the greenback cheaper for buyers using other currencies.

Spot gold was up 0.7 percent at $1,350.43 per ounce at 1042 GMT, while U.S. gold futures for February delivery climbed 1 percent to $1,349.80 per ounce.

"It's the weaker dollar, it's the inflation focus and it's also to some extent the market is continuing to look for a hedge against a world that's becoming incredibly complacent with stocks at record highs," said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

"We're honing in on the 2017 high around $1,357, which is going to be the next big level."

U.S. President Donald Trump is due to speak Friday at the World Economic Forum in Davos, Switzerland, and investors are concerned he will use the speech to signal a more protectionist policy stance.

"Global investors are also concerned about potential trade wars... which is stirring up some risk-aversion trade, so that, in turn, is supporting gold," said Richard Xu, a fund manager at China's biggest gold exchange-traded fund, HuaAn Gold.

"I think gold prices will continue to trend higher along with other commodities, so $1,400 (an ounce) is our near-term target," Xu said.

Markets also expect a U.S. interest rate hike in March. Gold is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion while boosting the greenback.

In other precious metals, silver gained 1.1 percent to $17.23 per ounce after touching a 3-1/2-week low of $16.73 in the previous session.

Platinum added 0.4 percent to $1,010.50 per ounce, while palladium rose 0.9 percent to $1,101.47 per ounce.

(Additional reporting by Nithin Prasad in Bengaluru, editing by Louise Heavens)