* Tension in Iraq, Korean peninsula support gold prices
* But market pressured by a firmer dollar
* Spot gold may drop to $1,281/oz -technicals
* Palladium off highest in over 16 yrs touched Monday
(Adds comment, detail; updates prices) Oct 17 (Reuters) - Gold prices were mostly steady on Tuesday, pressured by a firmer dollar but supported by worries over geopolitical tensions in the Middle East and on the Korean peninsula.
Spot gold was little changed at $1,293.24 an ounce at 0344 GMT, while U.S. gold futures for December delivery
were down 0.6 percent at $1,295.2 per ounce. "A lot of the price drivers that are clouding gold prices are really geopolitical tensions rather than fundamentals," said OCBC analyst Barnabas Gan. "But geopolitical tensions are a crucial and unquantifiable factor when it comes to affecting prices, so it (gold) is just all over the place now." Iraqi government forces captured the major Kurdish-held oil city of Kirkuk on Monday, responding to a Kurdish referendum on independence with a bold lightning strike that transforms the balance of power in the oil-producing country. Elsewhere, the United States is not ruling out the eventual possibility of direct talks with North Korea, Deputy Secretary of State John J. Sullivan said on Tuesday, hours after Pyongyang warned nuclear war might break out at any moment. The dollar edged up against its peers on Tuesday, supported President Donald Trump was favouring a policy hawk as the next head of the Federal Reserve. Trump will meet with Fed Chair Janet Yellen on Thursday as part of his search for a new candidate for her position, a source familiar with the planned meeting said. The Fed will probably need to raise interest rates in December and then three of four times "over the course of next year", assuming the U.S. unemployment rate continues to fall and inflation rises, Boston Fed President Eric Rosengren said.
Higher U.S. interest rates tend to boost the dollar and push up bond yields, putting pressure on greenback-denominated gold.
"On the bearish side, a resilient dollar and rising interest rates (and stocks) are all impacting gold negatively, while the fragile geopolitical mosaic is offering an element of support," INTL FCStone analyst Edward Meir said in a note. Spot gold may drop to $1,281 per ounce, as it failed to break resistance at $1,305, said Reuters technicals analyst Wang Tao.
In other precious metals, silver and platinum
were both down 0.1 percent at $17.17 and $927.50 an ounce respectively.
Palladium was 0.4-percent higher at $976.50 an ounce,
after hitting its best since February 2001 in the previous session.
(Reporting by Apeksha Nair in Bengaluru; Editing by Joseph Radford)