PRECIOUS-Gold inches up as investors still wary of U.S.-Iran conflict risk

Sumita Layek

(Updates prices, adds comment and details)

* Gold bulls are buying at critical support level- analyst

* Palladium hits record peak of $2,149.50/oz

* SPDR Gold holdings fell 1.05% on Wednesday

Jan 9 (Reuters) - Gold prices edged higher on Thursday as investors preferred to stay put with safe-haven assets even though the chances of an escalation in U.S.-Iran conflict waned after the two sides softened their stance.

Spot gold was up 0.3% at $1,560.36 per ounce by 0300

GMT. Prices hit their highest since March 2013 at $1,610.90 on

Wednesday. U.S. gold futures were flat at $1,560.50.

President Donald Trump said on Wednesday the United States did not necessarily have to respond militarily to Iran's attack on U.S. troops in Iraq, while Iranian Foreign Minister Mohammad Javad Zarif said the strikes "concluded" Tehran's response to the killing of commander Qassem Soleimani.

"The subsequent rhetoric seems to suggest that they (Iran) are not going to follow on, similarly Trump signaled that there is no immediate intent to respond militarily, so there is a degree of relief in markets," said Ilya Spivak, a senior currency strategist at DailyFx. "We did not see an immediate escalation, although it would not be accurate to say that it cannot happen for sure, there is that risk." Gold, considered a safe investment in times of political and economic uncertainty, had risen as much as 2.4% on Wednesday and surpassed the key $1,600 level after Iran's retaliatory attacks. Limiting gold's advance, Asian stocks rallied on the easing concerns of conflict. .".. lingering geopolitical concerns around the Middle East are keeping a bid under gold," Stephen Innes, a market strategist at AxiTrader said in a note. "Gold Bulls are still buying at the critical support level as back burner influences around trade and U.S. data uncertainty continues to argue for gold in the portfolio even as oil prices sell-off, and U.S. equities are back near record highs." Investors also took stock of data from China where producer prices in December fell 0.5% from a year earlier, marking the sixth month of contraction as manufacturers struggled with weak demand and the trade war. Holdings of the world's largest gold-backed exchange-traded

fund SPDR Gold Trust fell 1.05% to 886.81 tonnes on


Among other precious metals, palladium hit a record

peak of $2,149.50 an ounce on sustained supply concerns, and was last up 1.2% to $2,129 an ounce.

Silver gained 0.3% to $18.14 per ounce, after hitting

its highest since September at $18.85 on Wednesday, while

platinum rose 0.5% to $958.73.

(Reporting by Sumita Layek in Bengaluru; Editing by Shailesh Kuber)