* Gold up 1.2 pct for week so far
* U.S. economy accelerates, inflation weaker than expected
* Dollar nears 13-month lows (Recasts; updates prices; adds comment, byline, NEW YORK dateline)
By Marcy Nicholson and Peter Hobson
NEW YORK/LONDON, July 28 (Reuters) - Gold prices rose to a six-week high on Friday after weaker than expected U.S. inflation dampened expectations that the U.S. Federal Reserve will aggressively raise interest rates and North Korea fired a ballistic missile, triggering safe-haven buying.
Data on U.S. second quarter gross domestic product (GDP) and labor costs also pushed the dollar lower, making bullion cheaper for holders of other currencies. .DXY FRX/
"It showed a big fall in annual inflation rates across the board ... so there is no urgency for the Fed to raise interest rates," said Commerzbank (DE:CBKG) analyst Carsten Fritsch.
Gold is sensitive to rising rates because they push up bond yields, making non-yielding gold less attractive, and tend to boost the dollar.
Spot gold XAU= was up 0.8 percent at $1,268.84 an ounce by 1:50 p.m. EDT (1750 GMT), after touching $1,270.38, the highest since June 14. It was on track to rise for a third week in a row.
U.S. gold futures GCcv1 for August delivery settled up 0.7 percent at $1,268.40.
North Korea fired a missile on Friday in an unusual late-night test launch, and details announced by Japanese officials and media suggested it could be an intercontinental ballistic missile (ICBM). has to be at least a modest factor here that risk is rising in North Korea. We're not off to the races, we're not above $1,300 yet, but certainly there is room for speculators to increase their position," said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management.
"It doesn't hurt that you've got a weak U.S. dollar, and real rates have fallen off a little bit. Interest rates are under pressure, inflation's in question."
The U.S. dollar index .DXY fell on a combination of underwhelming U.S. economic data and political uncertainty, while global stock markets were also weak. USD/ MKTS/GLOB
Julius Baer analyst Carsten Menke said the rally was fragile because it has been accompanied by physical market selling and he expected prices to fall to $1,200 an ounce.
Globally, the market had a surplus of 138 tonnes in the first half of 2017 as demand from physically-backed exchange traded funds tumbled, GFMS analysts at Thomson Reuters said this week. other precious metals, silver XAG= was up 1 percent at $16.69 an ounce, on track for a third weekly gain.
Platinum XPT= was 1.2 percent higher at $933.60 an ounce but set for its first weekly decline in three. Palladium XPD= was up 0.7 percent at $878.72, and was on track for its strongest weekly performance in seven weeks.