PRECIOUS-Gold jumps to 4-month peak as Middle East tensions spark safety buying

 (Updates prices)
    * Gold set for best week since early-August
    * U.S. manufacturing data for Dec. dips to decade lows
    * Silver extends gains into fourth week
    * Minutes of Fed's Dec. 10-11 policy meeting due at 2 p.m.

    By Karthika Suresh Namboothiri and K. Sathya Narayanan
    Jan 3 (Reuters) - Gold prices surged on Friday to a
four-month peak, racing past the key $1,550 an ounce level after
a U.S. air strike in Iraq killed the commander of Iran's elite
Quds Force, prompting a rush into safety assets.
    Spot gold        rose 1.3% to $1,548.94 per ounce as of 1:31
p.m. EST (1831 GMT), having risen to $1,553.20 earlier in the
session, its highest since Sept. 5.
    U.S. gold futures         settled 1.5% higher at $1,552.40.
    The overnight attack was a dramatic escalation in a "shadow
war" in the Middle East between Iran and the United States and
its allies, principally Israel and Saudi Arabia. Iran threatened
to retaliate after the air strike.             
    "With the U.S. air strikes overnight in Iraq from orders of
President Trump and Iran's leader vowed revenge as a result, the
equity markets are down and safe-havens are higher, causing a
move higher in the precious metals," said David Meger, director
of metals trading at High Ridge Futures.            
    "The market has been trading well since we broke out above
the $1,490 level, making new recent highs this morning up above
    U.S. 10-year yields fell sharply, while the Japanese yen hit
a two-month high against the U.S. dollar.             
    Gold, like other safe-haven assets, benefits during times of
political uncertainty. The metal was set for its best week since
early-August, up more than 2.5%.
    "We are seeing gold and silver continue to build on the
gains we saw towards the end of December and there is no doubt
that the latest developments with the attack in Iraq has taken
us up to this level," Saxo Bank analyst Ole Hansen said.
    U.S. manufacturing sector data, which contracted in December
by the most in more than a decade, further supported gold. 
    Markets were also watching out for minutes of the Federal
Reserve's Dec. 10-11 policy meeting, due out at 2 p.m. EST (1900
    On the trade front, The United States and China are to sign
an interim deal on Jan. 15, but investors await details
regarding the fine print of the agreement. 
    Elsewhere, palladium        added 1.3% to $1,985.40 an
ounce, after rising to $1,988.27 earlier in the session, not far
from the all-time high of $1,998.43 notched in December.
    Platinum        gained 0.4% to $982.84 an ounce and was set
for its biggest weekly gain since October. Silver        was up
0.3% at $18.08, extending gains into a fourth straight week.

 (Reporting by Karthika Suresh Namboothiri and K. Sathya
Narayanan in Bengaluru; Editing by Dan Grebler)