PRECIOUS-Gold hits 3-week high as longs return on Obama victory

* Geopolitical tensions rise after Pentagon news on Iran
* Worries over U.S. "fiscal cliff" support gold
* China seen surpassing India as top gold consumer

By Josephine Mason and David Brough
NEW YORK/LONDON, Nov 8 (Reuters) - Gold rose to three-week
highs on Thursday as investors continued to bet on easier U.S.
fiscal policy following President Obama's victory, and prices
also got a bounce from fears about increased tensions between
the United States and Iran.
Prices extended gains in afternoon trade, jumping just over
$10 to $1,734 ounce - their highest level since Oct. 19 - after
the Pentagon said Iran fired on a U.S. unmanned, unarmed
surveillance drone on Nov. 1.
Safe-haven buying held prices up even though there appeared
to be little cause for immediate concern. The authorities said
the incident took place over a week ago, with the craft
undamaged and returned safely to its base.
"Something popped after the Pentagon confirmed Iran shot on
a drone last week," said a New York-based broker.
Spot gold was at $1,731.61 an ounce by 4:23 p.m. EST
(2123 GMT), up $15.30. After four days of gains, the market was
on track for its biggest weekly rise since the end of August.
U.S. gold futures for December delivery settled up
$12, or 0.70 percent, at $1,726 an ounce.
Earlier in the day, expectations that four more years of a
Democrat in the White House would contribute to an extension of
the Federal Reserve's easy monetary policy continued to provide
upward momentum.
"This is the longs coming back because of the continued
perception that easier money will be in place," said Frank
McGhee, head metals trader of Integrated Brokerage Services LLC.
Worries about the "fiscal cliff" provided support for
safe-haven gold, even as a strong dollar offset upward pressure
on prices by making it more expensive for buyers holding other
currencies.
Europe's crisis moved back into the spotlight, with the euro
falling to a two-month low against the dollar after the European
Central Bank held interest rates at a record low and said the
euro zone's economy showed little sign of recovering before
year-end.
In the longer term, traders said gold is likely to benefit
from uncertainty over the looming "fiscal cliff" when nearly
$600 billion worth of spending cuts and tax increases kick in
with the risk of pushing the U.S. economy into deep recession.
"We will continue with support around $1,700 and $1,680, but
before the end of the year, gold should gradually rise because
we have liquidity (quantitative easing), and low yields," said
Andrey Kryuchenkov, analyst with VTB Capital.

INDIAN DEMAND HURT BY HIGH PRICES
Signs emerged though that high prices may hurt demand, with
gold importers in India, the world's biggest buyer, holding off
buying even as the country's festival season approaches its peak
next week with Diwali.
China may help to offset weakness in consumption over the
Indian wedding season, which typically the strongest time of
year for gold purchases.
China's gold demand is expected to grow 1 percent this year
to a record of around 860 tonnes, overtaking India as the
world's biggest consumer of gold for the first time on a yearly
basis, the global head of metals at consultancy Thomson Reuters
GFMS said on Thursday.
"China will overtake India ... both in overall demand terms
and as the world's largest jewellery market," he told the online
Reuters Global Gold Forum.
Spot platinum was down 0.15 percent at $1,541.25 and
spot palladium was up 0.41 percent to $611.97.
Silver rose 1.83 percent to $32.34 an ounce.

4:49 PM EST LAST/ NET PCT LOW HIGH CURRENT
SETTLE CHNG CHNG VOL
US Gold DEC 1726.00 12.00 0.7 1712.60 1735.10 150,022
US Silver DEC 32.24 0.579 1.8 31.630 32.450 41,109
US Plat JAN 1542.50 3.00 0.2 1534.70 1549.50 7,741
US Pall DEC 614.35 4.00 0.7 604.90 616.30 2,704

Gold 1729.99 13.68 0.8 1713.30 1734.81
Silver 32.320 0.560 1.8 31.670 32.400
Platinum 1540.75 1.76 0.1 1535.75 1544.75
Palladium 611.97 2.50 0.4 608.00 614.50

TOTAL MARKET VOLUME 30-D ATM VOLATILITY
CURRENT 30D AVG 250D AVG CURRENT CHG
US Gold 177,527 174,094 16.3 0.03
US Silver 53,400 56,876 25.46 -2.41
US Platinum 7,919 9,735 19.29 0.06
US Palladium 3,266 4,807