PRECIOUS-Gold up, touches 2-week peak but still near December lows

    * Spot gold hits highest since June 26
    * Palladium touches strongest since June 21

 (New throughout, updates prices, market activity and comments;
adds second byline and NEW YORK dateline)
    By Renita D. Young and Eric Onstad
    NEW YORK/LONDON, July 9 (Reuters) - Gold rose on Monday,
touching its highest in two weeks as the dollar weakened and the
Chinese yuan recovered from June's lows, and gold stayed higher
even as the dollar bounced up, as some investors bought bullion
to cover short positions.
    Some traders noted that gold was still mired near lows hit
in December.
    Spot gold        increased 0.3 percent to $1,258.52 per
ounce by 1:36 p.m. EDT (1736 GMT). The session high of 1,265.87
was its highest since June 26.
    U.S. gold futures         for August delivery settled up
$3.80, or 0.3 percent, at $1,259.60 per ounce.    
    "Most likely the yuan will remain volatile but (I don't
expect ...) aggressive weakness, so that means the only thing
that is driving gold at the moment is the dollar, which is
somewhat weaker," said Georgette Boele, commodity strategist at
    The yuan rose in offshore markets against the dollar
        , further off the lows hit in June when it notched its
biggest ever monthly fall. The U.S. dollar index        weakened
early and the euro gained, but the dollar bounced higher in
later trading.       
    A weak dollar makes greenback-denominated gold cheaper for
holders of other currencies, especially in Europe when the euro
    The euro           hit a session high after European Central
Bank Governing Council member Ewald Nowotny said the bank could
decide this month to end bond buying by the end of this year.
    Some investors had bought gold to cover their short
positions, said OCBC analyst Barnabas Gan.
    Additionally, Britain's Brexit Secretary David Davis said he
resigned to try to stop Prime Minister Theresa May from handing
too much power to the European Union.            
    "A little buying could've also come from the North Korea
meeting that didn't exactly go great," said RJO Futures' Josh
    Donald Trump raised concerns that Beijing may be seeking to
derail North Korea denuclearization efforts, though said he was
confident Pyongyang leader Kim Jong Un will uphold his end of
the deal.             
    Graves said Monday's gold price increase will likely be
    "It's running into lows we saw in December--$1,275. Until we
see some moves above there, I don't think gold has the strength
to get (higher)," Graves said.
    Meanwhile, silver        rose 0.6 percent at $16.10 an ounce
and platinum        gained 0.4 percent at $844. Both metals
earlier hit their highest since June 27.
    Palladium        gained 0.5 percent to $958 an ounce,
reaching $967.50, its highest since June 21.

 (Additional reporting by Karen Rodrigues in Bengaluru
Editing by David Gregorio and Mark Potter)