PRECIOUS-Gold prices hit 2-week high amid subdued dollar

* Spot gold may test resistance at $1,299/oz- technicals

* Dollar index hits lowest since Sept. 26

(Updates prices, adds MKS trader's comment) Oct 12 (Reuters) - Gold prices rose to their highest in two weeks on Thursday amid a muted dollar, after minutes from the Federal Reserve's latest policy meeting showed the U.S. central bank was concerned over low inflation.

Spot gold was up 0.2 percent at $1,294.56 an ounce by

0657 GMT, after earlier marking its best since Sept. 27 at $1,296.43.

U.S. gold futures for December delivery climbed 0.6

percent to $1,297.20 per ounce. "Gold prices rose slightly as the market appeared to take the Fed minutes as slightly dovish. In particular, it was the comments on persistently low inflation that seemed to gain much attention. This saw the U.S. dollar weaken slightly, increasing investor appetite for the precious metal," ANZ analysts said in a note. Fed 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, minutes from the U.S. central bank's last policy meeting on Sept. 19-20 released on Wednesday showed.

The dollar hit its lowest in over two-weeks against a basket of currencies on Thursday following the news. 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. U.S. short-term interest rate futures were steady on Wednesday as traders stuck to their bets on a possible rate hike in December. "Although it seems likely that the FOMC will increase rates in December, the upcoming U.S. inflation data will be closely watched...with softer than expected data expected to provide bullion with impetus for a sustained push back above $1,300," MKS PAMP trader Sam Laughlin said in a note. Gold is highly sensitive to rising interest rates, as these tend to boost the dollar, the currency in which the metal is priced. "Investors' concerns over escalating tensions between the United States and North Korea remain high," ANZ analysts noted. Trump has "lit the wick of war" with North Korea and his country will be made to pay with "a hail of fire", a Russian news agency quoted North Korea's foreign minister as saying on Wednesday. "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," said Yuichi Ikemizu, Tokyo branch manager at CIBC Standard Bank. Spot gold may test resistance at $1,299 per ounce, with a good chance of breaking above this level and rising more towards the next resistance at $1,305, Reuters technicals analyst Wang Tao said.

Silver rose 0.3 percent to $17.21 an ounce. Platinum was 0.3 percent higher at $930.50 an ounce,

after marking an over two-week high earlier in the session.

Palladium fell 0.4 percent to $955.65 an ounce.

(Reporting by Apeksha Nair in Bengaluru; Editing by Vyas Mohan and Biju Dwarakanath)