* Gold pares gains in line with euro, stocks, commods
* Spot prices head for second week of decline
* SPDR gold ETF set for biggest weekly outflow in 18 months (Updates prices)
By Clara Denina and Jan Harvey
LONDON, Feb 22 (Reuters) - Gold steadied near $1,575 an ounce on Friday, paring earlier gains in line with the euro and other commodities, and stayed on track for a second straight weekly loss after a drop to seven-month lows dented investment interest in the metal.
The metal bounced above $1,580 in earlier trade as European stocks recovered from two-week lows, and other commodities like Brent crude and copper prices recouped the hefty losses they made earlier in the week.
It surrendered those gains, however, as the euro fell against the dollar after the European Central Bank announced smaller than expected repayments on its loans to banks, and other assets retreated.
Spot gold was little changed at $1,575.86 an ounce at 1523 GMT, staying on course for a weekly decline of 1.5 percent, its second week in the red. U.S. gold futures for April delivery were down 0.2 percent at $1,575.90.
Confidence in gold was still fragile after the metal fell to a seven-month low of $1,554.49 on Thursday after minutes from the Fed's latest policy meeting triggered worries the central bank might slow its bond buying programme.
"There's no doubt that the resolute sense of bullishness we've had in gold over the last couple of years has weakened substantially," Mitsui Precious Metals analyst David Jollie said.
"While there are still plenty of people who are bullish long term, short term sentiment is understandably more negative."
Investors are concerned that any paring back of the Federal Reserve's monetary easing policy could hurt gold. Soft jobs and manufacturing data this week has pointed to continued headwinds to the U.S. economy, however.
St. Louis Fed president James Bullard said on Friday that the Fed will keep its loose monetary policy stance for a long while despite increasing signs of concern among policymakers about the potential costs of asset buying.
Easy global monetary policy has helped gold rally in the past few years as investors, worried about currency debasement and inflation as a result of money printing by central banks, sought refuge in the precious metal.
Bargain hunting by investors of physical gold in Asia also helped lift prices, analysts said, although this will likely struggle to offset weaker interest elsewhere.
"It remains to be seen if the ongoing rebound will be sustained with the help of physical buyers," broker VTB Capital said in a note. "However, we do not think damaged investor confidence can be restored this quickly."
ETFs LIQUIDATION CONTINUES
Investors continued to bail out of SPDR Gold Trust this week, depressing prospects of significant price gains, analysts said. The fund is on track for its biggest weekly outflow since August 2011.
The world's biggest gold-backed exchange-traded fund reported that holdings dropped 8.89 tonnes on Feb. 21 to 1,290.306 tonnes, the lowest in more than five months. In the previous session, holdings slumped more than 20 tonnes, its biggest one-day drop in 18 months.
Platinum and palladium, this year's best performing precious metals, also surrendered earlier gains, remaining largely flat.
Spot platinum was unchanged at $1,610.49 an ounce, after prices fell 3 percent to a five-week low of $1,593.45 in the previous session. Palladium was down 0.1 percent at $727.47 an ounce, having fallen to a one-month trough of $707.22 on Thursday.
Spot silver extended losses, down 0.5 percent to $28.50 an ounce. (Editing by William Hardy)
