* Gold rises 1 pct
* Dollar hits seven-month low, U.S. bond yields fall
* Palladium highest since Sept. 2014
(Updates prices) LONDON, June 6 (Reuters) - Gold rose to its highest in seven weeks on Tuesday as weak economic data in the United States reduced expectations of rapid U.S. interest rate rises this year, pushing the dollar to a seven month-low and lowering U.S. bond yields. Investors were also drawn to gold, seen as a safe place to park assets, by uncertainty around Thursday's European Central Bank meeting, an election in Britain and 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. Interest rate rises, however, push bond yields higher and tend to strengthen the dollar.
Spot gold was up 1 percent at $1,292.01 an ounce at
1230 GMT, having earlier touched its highest since April 17 at$1,293.67.
U.S. gold futures were 0.9 percent higher at
$1,294.50 an ounce. "Light positioning and numerous upcoming geopolitical events should continue to underpin demand for the metal," said MKS PAMP trader Sam Laughlin in a note. "Targets extend to the 2017 high around $1,295 and the psychological level of $1,300 above this." 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. "The uptrend seems intact," said Mitsubishi analyst Jonathan Butler. "It's been helped by the dollar drifting lower and equity markets in the U.S. trading more or less flat."
Weak U.S. economic data has left investors less certain of aggressive U.S. interest rate rises this year, Butler said, while bullion traders had already priced in a rate rise this month. 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. Butler also said 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.
In other precious metals, silver rose 0.9 percent to
$17.66 an ounce, its highest since April 25.
Palladium climbed 1 percent to $849.80 an ounce, its highest since September 2014. Platinum was up 1.3 percent
at $962.60 an ounce.
(Additional reporting by Vijaykumar Vedala, Koustav Samanta and Eric Onstad; editing by Edmund Blair and David Clarke)