PRECIOUS-Palladium surges to 14-month high; gold shines on weak U.S. data

* Palladium rises to highest in 14 months
    * Gold upbeat on weak U.S. worker productivity data
    * GRAPHIC-Plat/palladium ratio:

 (Updates prices; adds comment, second byline, NEW YORK
    By Marcy Nicholson and Zandi Shabalala
    NEW YORK/LONDON, Aug 10 (Reuters) - Palladium and platinum
rose sharply on Wednesday as bets on lower prices were reversed
in thin conditions after the metal broke above key chart levels,
while gold rose as weak U.S. data weighed on the dollar.
    Palladium surged overnight in Asia, hitting 14-month highs
and marking the biggest one-day rally in more than five months.
Traders said a wave of short covering was likely triggered after
the metal broke above $700 an ounce, and then above last week's
14-month peak of $723 an ounce.
    Spot palladium was up 4.1 percent at $722.50 an ounce
2:57 p.m. EDT (1857 GMT), having risen as high as $746.10 an
ounce in Asian trading hours. The move was likely to have been
exacerbated by thin liquidity, analysts said.
    The surprise rally appeared to be a combination of
short-covering and new longs, one U.S. physical dealer said.
    On Tuesday, the China Passenger Car Association said vehicle
sales jumped in July, but palladium prices barely reacted with a
quiet nudge higher on that day. 
    "There's a likelihood that that had a play in the picture,"
the dealer said about Wednesday's rally.
    Palladium, used in catalytic converters in cars, saw its
biggest one-month price rise in 8-1/2 years in July, potentially
leaving investors who had bet on lower prices exposed to heavy
    Platinum was up 2 percent at $1,173.24 after rising
to $1,191.70, its loftiest in over 17 months.
    "(Commodity) prices today are being supported by a
combination of short covering and a weak dollar. Many people
were a few positions short and you saw a lot of trying to cover
that," Marex Spectron's head of precious metals David Govett
    Gold, often perceived as a hedge against economic and
financial risk, 0.5 percent higher at $1,346.53 an ounce.
    The most active U.S. gold futures for December
delivery settled up 0.4 percent at $1,351.90. 
    The metal rose after a report that U.S. worker productivity
fell for a third straight quarter in the spring of this year,
shrugging off earlier losses on Friday's jobs report and
pressuring the dollar index. 
    The unexpected drop in U.S. productivity may confirm the 
Federal Reserve's fears that the economy could slip into a
period of slow growth, reducing the central bank's willingness
to raise interest rates. 
    Holdings of SPDR Gold Trust, the world's largest
gold-backed exchange-traded fund, fell for a second straight day
on Tuesday. 
    Spot silver was up 1.6 percent at $20.15.

 (Additional reporting by Jan Harvey in London and Nallur
Sethuraman in Bengaluru. Editing by Adrian Croft and Chizu