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

By Marcy Nicholson and Eric Onstad

NEW YORK/LONDON (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 Friday.

"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 sales.

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)