* Spot gold hits lowest since Dec. 26
* Trump imposes tariffs on $50 bln of Chinese goods
* Palladium headed for first weekly decline in four (New throughout, updates prices, market activity and comments; adds second byline and NEW YORK dateline)
By Renita D. Young and Eric Onstad
NEW YORK/LONDON, June 15 (Reuters) - Gold prices slumped to a 5-1/2-month low on Friday, as investors from China jittery about trade skirmishes with the United States unloaded bullion, and others joined the selling spree after prices breached below technical support of $1,290 per ounce.
U.S. President Donald Trump announced hefty tariffs on $50 billion of Chinese imports, and Beijing threatened to respond in kind. The move, which looks set to ignite a trade war between the world's two largest economies, rattled gold investors. biggest buyers in gold recently were China, India and Russia. China began selling off and the hedgers started to sell after (the United States-China trade announcements)," said George Gero, managing director of RBC Wealth Management. "That sent the price going down, which set off sell stops."
Spot gold XAU= lost 1.8 percent to trade at $1,278.80 per ounce by 2:02 p.m. EDT (1802 GMT),its weakest since late December. It was on track for its biggest daily drop since November 2016. U.S. gold futures GCcv1 for August delivery settled down $29.80, or 2.3 percent, at $1,278.50 per ounce.
For the week, spot gold was down 1.6 percent.
"After it was clear today that gold had failed to clear the $1,300 level, people rushed to the exit," a trader in Europe said.
Earlier this week, some investors took long positions ahead of key central bank decisions. Gold briefly surged to a one-month peak on Thursday of $1,309.30, then retreated when the dollar strengthened.
"Weak demand coupled with technical support levels being broken has led us to gold being down pretty hard despite the Trump tariffs on China," said Josh Graves, senior market strategist at RJO Futures.
"When it hit $1,290, you saw sell stops get triggered," he added.
The U.S. dollar index .DXY , was slightly firmer after hitting the highest since November. USD/
The International Monetary Fund said Trump's new tariffs could undermine global trade, prompting other countries to retaliate and damage the U.S. economy. might still get a boost if there is a correction on equities markets, Butler siad, noting that strong first-quarter profit reports failed to lift global equities prices back to record highs.
Meanwhile, silver XAG= fell 3.8 percent at $16.49 an ounce, headed for a 1.6 percent weekly decline.
Platinum XPT= fell 1.4 percent at $887.60 an ounce, poised for a 1.5 percent weekly drop and palladium XPD= shed 1.7 percent at $990.60 and was on course for a 2.4 percent weekly decline.