PRECIOUS-Gold rallies to 4-month high after U.S. air strike in Baghdad

    * U.S. air strike kills commander of Iran's elite Quds force
    * Silver climbs to over two-month high; platinum jumps 1%
    * Minutes of Fed's Dec. 10-11 policy meeting due at 1900 GMT

 (Adds comments, updates prices)
    By K. Sathya Narayanan
    Jan 3 (Reuters) - Gold rose over 1% on Friday and was within
a striking distance of a more than 6-1/2 year high, as investors
flocked to the safe-haven metal after a senior Iranian military
official was killed in an air strike authorised by the United
    Tensions flared after Iranian Major-General Qassem
Soleimani, head of the elite Quds Force, and top Iraqi militia
commander Abu Mahdi al-Muhandis were killed in the air strike on
their convoy at Baghdad airport.             
    Spot gold        rose 1.3% to $1,548.70 per ounce as of 1159
GMT and touched it highest since early September, when bullion
scaled a multi-year peak of $1,557. 
    U.S. gold futures         climbed 1.6% to $1,551.70.
    "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.
    Iraq's prime minister condemned the strike and said it would
"light the fuse of a destructive war in Iraq".            
    "From a technical perspective, key level of support is just
around $1,520 and as long as we stay above that level we are
going to see further gains come into the market," Hansen said,
adding the sell-off in equities was also supporting gold.
    Gold, a safe investment in times of political and economic
uncertainties, has gained 2.6% so far this week.
    "The latest rally was entirely driven by geo-political
tensions and this would be the main driver in the shorter term
and to overcome the September high, further escalation is
necessary," Commerzbank analyst Carsten Fritsch said.
    On the trade front, U.S. and China are due to sign an
interim deal on Jan. 15, but investors await details regarding
the fine print of the agreement.                         
    "Focus would turn to 'Phase 2' talks, which will be 
difficult since it would deal with most delicate issues. So
we'll be back at square one and will be driven by progress and
set backs in those talks," Fritsch said.
    Markets now await the minutes of the Federal Reserve's Dec.
10-11 policy meeting due at 1900 GMT.
    Mirroring gains in gold, silver        rose 0.7% to $18.15
per ounce, having touched its best level in two months.
    Platinum        rose 1% to $988.21 and was up 4.6% so far
this week. Palladium        was up 0.5% at $1,969.31, on track
for a weekly gainof more than 3%.

 (Reporting by K. Sathya Narayanan in Bengaluru, editing by
Louise Heavens)