PRECIOUS-Gold edges up on softer dollar, palladium at 16-year peak

    * Spot gold may test resistance at $1,294/oz- technicals
    * Palladium at over 16-year high

 (Updates prices)
    By Apeksha Nair
    BENGALURU, Aug 17 (Reuters) - Gold rose on Thursday as the
dollar remained subdued after minutes from the U.S. Federal
Reserve's July meeting hinted at a delay in further rate hikes,
while palladium hit a fresh 16-year high.
    Spot gold        was up 0.4 percent at $1,287.90 per ounce
by 0700 GMT, after gaining nearly 1 percent the previous day.
    U.S. gold futures         for December delivery rose 0.8
percent to $1,293.70 per ounce.
    "It's a dollar story and a concern that the market's been
having with regards to geopolitical events," said Dominic
Schnider at UBS Wealth Management in Hong Kong.
    The U.S. dollar was on the defensive on Thursday after the
minutes from the Fed's last policy meeting showed policymakers
were increasingly wary of recent softness in inflation and some
called for halting interest rate hikes until it was clear the
trend was transitory.                    
    "The market believes at the moment that there's not much
inflation and the Fed need not do much," Schnider said.
    "We disagree, and believe the Fed will in September come
with a balance sheet reduction and hike rates in December."
    The U.S. central bank is roughly at the mid-point on its
current path to normalize interest rates as the economy has
shown further improvement even without fiscal stimulus, San
Francisco Federal Reserve President John Williams told CNN
television on Wednesday.              
     Higher interest rates could boost the dollar, making
commodities priced in the greenback more expensive for holders
of other currencies.   
     Spot gold may test a resistance at $1,294 per ounce, a
break above which could lead to a gain to the next resistance at
$1,304, Reuters technical analyst Wang Tao said.             
    "In the shorter term, and in the absence of any geopolitical
headlines, traders should watch the performance of the dollar
against its G-10 peers for clues to gold's short term
direction," said Jeffrey Halley, a senior market analyst at
     Meanwhile, palladium        was up 0.7 percent at $920.48
after earlier marking it highest since Feb. 2001 at $927.80.
    "Palladium took some inspiration from the more industrially
oriented metals," UBS's Schnider said, pointing to a broad based
rally that has pushed the prices of aluminium, copper and zinc
to multi-year peaks.        
    The auto industry is by far the largest consumer of the
    Among other precious metals, silver        was up 0.3
percent at $17.13 per ounce, while platinum        was unchanged
at $976 an ounce.

 (Reporting by Apeksha Nair and Arpan Varghese in Bengaluru;
Editing by Richard Pullin)