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PRECIOUS-Gold rises as dollar sinks before U.S. inflation data

  * Dollar index hits lowest since Sept. 26
    * Palladium touches five-week high
    * GRAPHIC-2017 asset returns: tmsnrt.rs/2jvdmXl

 (Updates prices, adds graphic)
    By Zandi Shabalala
    LONDON, Oct 12 (Reuters) - Gold rose to its highest level in
two weeks as the dollar hovered near two-week lows ahead of U.S
inflation figures on Friday which are expected to give more
clues on monetary policy.
    In its fifth straight session of gains, spot gold        was
up 0.3 percent at $1,295.58 an ounce by 1135 GMT, after earlier
hitting $1,297.40. U.S. gold futures         climbed 0.7 percent
to $1,298 per ounce.
    "If inflation were to rise more than expected or at least
meet expectation ... this could underpin the dollar which could
undermine gold," Fawad Razaqzada, an analyst at FOREX.com, said.
    Minutes from a September meeting by the U.S. Federal Reserve
showed policymakers had a prolonged debate about the prospects
of a pickup in inflation and slowing the path of future interest
rate rises if it did not.            
    The dollar was steady but was stuck near two-weeks lows
against a basket of currencies on Thursday following the news.
      
    Gold is highly sensitive to rising interest rates, as these
tend to boost the dollar, in which the metal is priced.
    Several policymakers said they would focus on upcoming
inflation data over the next few months when deciding on the
central bank's future rate hike path.
    Political uncertainty also helped to support gold, which
investors turn to during periods of turmoil, analysts said.
    "If people are not too worried about the Fed's policy, we
have North Korea. Surely, geopolitical tensions are supporting
prices ... we may try $1,300 next week," Yuichi Ikemizu, Tokyo
branch manager at CIBC Standard Bank, said. 
    Silver        rose 0.2 percent to $17.19 an ounce after
touching a three-week high.
    Platinum        was 0.5 percent higher at $932.45 an ounce,
after hitting a more than two-week high earlier in the session. 
    Palladium        jumped 1.6 percent to $974, its highest 
since Sept. 6.
    Discussions over a possible substitution between platinum
group metals in auto catalysts will likely gather pace if the
palladium continues to trade at a premium to the platinum, Bank
of America Merrill Lynch said in a note earlier this month. 

    
 (Additional reporting by Apeksha Nair in Bengaluru; editing by
Alexander Smith and Jane Merriman)

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