PRECIOUS-Gold falls from three-week high, palladium off 2001 top

    * Palladium marks highest since February 2001
    * Silver hits four-week high

 (Updates prices; adds comment, byline, NEW YORK dateline)
    By Marcy Nicholson and Eric Onstad
    NEW YORK/LONDON, Oct 16 (Reuters) - Gold turned lower on
Monday, pressured by profit-taking after extending gains above
the $1,300 mark to a three-week high amid ongoing tensions over
Iran and North Korea as well as recent weak U.S. economic data.
    Palladium fell after making another break above $1,000 an
ounce to the highest levels since early 2001 on the back of
strong Chinese auto sales.
    Spot gold        was down 0.6 percent at $1,296.51 an ounce
by 2:35 p.m. EDT (1835 GMT). U.S. gold futures         for
December delivery settled down 0.1 percent at $1,303.
    Spot gold has been rebounding since touching a two-month low
of $1,260.16 on Oct. 6, lifted by worries about North Korea and
a weak dollar.
    "You're seeing a little bit of profit-taking," said Bob
Haberkorn, senior market strategist for RJO Futures in Chicago.
    "There's a reluctance to take too much off the table because
of some of the geopolitical risks that are out there."
    World stocks rose on upbeat Chinese data and the U.S. dollar
index        edged up following disappointing inflation data on
    "Last Friday we had a rather disappointing CPI number, which
further enforced the view that there's no need for the Fed to be
very aggressive in terms of rate hikes," said analyst Carsten
Menke at Julius Baer in Zurich.  
    Rising U.S. interest rates tend to boost the dollar and push
bond yields up, putting pressure on the greenback-denominated,
non-yielding gold.
    Geopolitical risks, including over Iran and North Korea, are
likely to persist this week, Jeffrey Halley, a senior market
analyst with OANDA, said in a note.                         
    "This should all combine to ensure that gold maintains a
safe-haven tone this week," Halley said.
    Palladium        was down 1.6 percent at $972.10 an ounce
after reaching its highest since February 2001 at $1,010.50.
    Some investors had been wary when the metal, mostly used for
auto catalysts to clean pollution from exhaust fumes, broke
above $1,000 on Sept. 6, due to concern about weak global auto
    Those worries seem to have been swept aside after the
world's biggest auto market China last week reported sales
growth of 5.7 percent in September.             
    UBS strategist Joni Teves said palladium's gains were
justified by supply/demand fundamentals, which include a market
deficit of 830,000 ounces this year.
    "This comes after persistent shortfalls over the past five 
years, which has clearly drawn down considerably on above-ground
 inventories," she said in a note.
    Silver        fell 0.7 percent to $17.23 an ounce after
hitting $17.46, its highest since mid-September, while platinum
       eased 1.1 percent to $932.80 an ounce.

 (Additional reporting by Apeksha Nair in Bengaluru; Editing by
Louise Heavens and James Dalgleish)