PRECIOUS-Gold surges to seven-month high on weaker dollar, political risks

    * Gold rises 1 pct to highest since early Nov
    * Dollar hits seven-month low, U.S. bond yields fall
    * Palladium highest since Sept. 2014

 (Updates prices, milestones, dollar move; adds comments, NEW
YORK dateline)
    By Devika  Krishna Kumar and Peter Hobson
    NEW YORK/LONDON, June 6 (Reuters) - Gold rose to the highest
in seven months on Tuesday on a slump in the dollar to a
seven-month low and safe-haven demand driven by a rift in the
Middle East, an upcoming European Central Bank meeting and the
British election. 
    Investors were also drawn to gold, seen as a safe place to
park assets, by uncertainty around the testimony to a Senate
committee by former FBI Director James Comey.             
    A weaker dollar makes gold cheaper for holders of other
currencies, while lower yields reduce the opportunity cost of
holding non-yielding bullion.             
    Weak economic data from the United States has reduced
expectations of rapid U.S. interest rate rises this year, but
the Federal Reserve is expected to hike rates at its June policy
meeting next week.                          
    Interest rate rises push bond yields higher and tend to
strengthen the dollar. 
    Spot gold        was up 1.1 percent at $1,294.34 an ounce by
2:25 p.m. EDT (1825 GMT), having earlier touched its highest
since Nov. 9 at $1,295.97. 
    U.S. gold futures         rose 1.2 percent to settle at
$1,297.50. The dollar index .DXY, which tracks the greenback
against six major rivals, was down 0.18 percent at 96.624       
    Gold has risen more than 6 percent since a low of $1,213.81
in early May as political turmoil in the United States created
doubts that President Donald Trump could enact economic
stimulus, pushing down the dollar and bond yields.
    "Gold surged to highs since Election Day as geopolitical
concerns with the UK election and Comey testimony both due
Thursday as well as fresh tensions on the Arabian peninsula
triggered strong buying in spot as well as options," said Tai
Wong, director of base and precious metals trading for BMO
Capital Markets in New York.  
    European Central Bank policymakers will take a more benign
view of the economy on Thursday and will even discuss dropping
some of their pledges to ramp up stimulus if needed, sources
told Reuters.              
    A decision by major gold consumer India to levy a sales tax
on gold at 3 percent rather than the expected 5 percent was
supporting bullion prices by spurring demand for physical metal,
analysts said.             
    From a technical standpoint, gold may be poised for further
gains, analysts said.
    "The long-term bearish trend line that had been in place
since the year 2011 has broken down and this could pave the way
for significant long-term gains," said Fawad Razaqzada, market
analyst at
    "A decisive break above the last swing high at $1,295 is
what the bulls want to see now."
    In other precious metals, silver        rose 0.9 percent to
$17.67 an ounce, its highest level since April 25. 
    Palladium        climbed 1.5 percent to $854.30 an ounce
after rising to $858.70, its highest since September 2014 while
platinum        gained 0.9 percent to $958.8 an ounce after
touching $967.50, the strongest since April 24.
    Platinum and palladium, mainly used to make auto catalysts
that clean exhaust fumes, have rallied despite data showing
weaker global auto sales in May, Julius Baer analyst Carsten
Menke said in a note.
    "We see technical rather than fundamental factors behind
this (palladium) rally, supporting bullish sentiment in the
futures market. We stick to our negative view and short
position, expecting prices to realign with the weaker demand
backdrop over the coming months."

 (Additional reporting by Vijaykumar Vedala, Koustav Samanta and
Eric Onstad; editing by David Clarke and Andrew Hay)