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PRECIOUS-Gold jumps to near 7-year high on U.S.-Iran tensions; palladium breaches $2,000

0409 GMT. Earlier in the session, it had rallied as much as

breaches $2,000@ (Adds comments, details and updates prices)

* Trump threatens sanctions against Iraq

* Gold could test key $1,600/oz mark - analyst

* Palladium hits record at $2,020.18/oz

* Silver rises more than 2%, hits highest since Sept. 25

Jan 6 (Reuters) - Gold surged close to a seven-year peak on Monday, as investors flocked to the safe-haven metal on escalating U.S.-Iran tensions, while palladium surpassed the level of $2,000 to hit a record high.

Spot gold rose 1.7% to stand at $1,577.98 per ounce

1.8% to touch $1,579.72, its highest since April 10, 2013.

U.S. gold futures gained 1.8% to $1,580.30.

"The geopolitics is taking center-stage," said Benjamin Lu, an analyst at Phillip Futures. "The Iran-U.S. tensions have escalated to a boiling point, that's what has been pushing gold prices up." President Donald Trump threatened sanctions against Iraq on Sunday after Baghdad demanded that American and foreign troops leave, amid a growing backlash over the U.S. killing of a top Iranian military commander, heightening fears of wider conflict. Further spurring uncertainty, Iran said it would drop limits on enriching uranium, taking a further step back from commitments to a 2015 nuclear deal with six major powers.

The market's risk-averse sentiment underpinned bullion, which is often seen as an alternative investment during times of political and financial uncertainty. Asian equities moved away from an 18-month peak and oil prices soared on the intense Middle East hostility.

"If it (gold) breaks the key resistance level of $1,585, it would lead to the key psychological level of $1,600," Lu said. Investors also took stock of a private survey on Monday that showed slower expansion in December in China's services sector, with business confidence falling to the second lowest on record, despite a pick-up in new orders.

Spot palladium hit an all-time peak of $2,020.18 an

ounce, and was last up 1.5% at $2,017.67. "The (palladium) market continues to tighten and that's what is pushing the market up," said ING analyst Warren Patterson, adding, "The key risk moving forward is how sustainable this price move is." Plagued by sustained supply deficit, palladium, used mainly in catalytic converters in vehicles, rose about 54% in 2019.

Elsewhere, silver gained 2.2% to $18.45 an ounce,

after touching a more than three month high at $18.50, while

platinum advanced 1% to $990.05.

(Reporting by Asha Sistla in Bengaluru; Editing by Clarence Fernandez and Rashmi Aich)