(Updates prices)
* Trump threatens sanctions against Iraq
* Gold could test key $1,600/oz mark - analyst
* Palladium hits record at $2,020.41/oz
* Silver hits highest since Sept. 25
By Asha Sistla
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 XAU= rose 1.4% to $1,572.59 per ounce by 0825 GMT. Earlier in the session, it had rallied as much as 1.8% to touch $1,579.72, its highest since April 10, 2013.
U.S. gold futures GCv1 gained 1.4% to $1,574.50.
"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 called for American and foreign troops to leave, amid a growing backlash over the U.S. killing of a top Iranian military commander, heightening fears of wider conflict. 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. 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. MKTS/GLOB O/R
"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. palladium XPD= hit an all-time peak of $2,020.41 an ounce earlier, and was last up 1.6% to $2,018.62.
"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 XAG= gained 1.7% to $18.33 an ounce, after touching a more than three month high at $18.50, while platinum XPT= advanced 0.4% to $984.83.