PRECIOUS-Gold inches up on safe-haven demand as Middle East tensions rise

By Sarah Qureshi

June 17 (Reuters) - Gold prices edged up on Tuesday as Iran-Israel tensions boosted safe-haven demand but a stronger dollar capped gains, while silver surged to a 13-year high.

Spot gold XAU= rose 0.2% to $3,390.59 an ounce as of 0151 pm EDT (1751 GMT). U.S. gold futures GCcv1 settled 0.3% lower at $3,406.9.

The U.S. dollar index =USD firmed 0.8%, making dollar-priced bullion more expensive for other currency holders. USD/

"Geopolitical uncertainty, with the Israeli-Iran war that will probably escalate before it de-escalates, is going to keep a floor under the market for safe-haven bidding," said Jim Wycoff, senior analyst at Kitco Metals.

U.S. President Donald Trump said that he wanted a "real end" to the nuclear dispute with Iran, and indicated he may send senior American officials to meet with the Islamic Republic as the Israel-Iran air war raged for a fifth day.

Elsewhere, the Federal Reserve will announce its policy decision on Wednesday, followed by Chair Jerome Powell's press conference.

The U.S. central bank is widely anticipated to leave its benchmark overnight interest rate in the 4.25%-4.50% range, where it has been since December. FEDWATCH

A low-interest-rate environment and geopolitical uncertainty tend to boost gold's appeal.

Central banks around the world expect their gold holdings as a proportion of their reserves to increase over the next five years, a survey by the World Gold Council showed.

Data showed that U.S. retail sales dropped more than expected in May, but consumer spending remained supported by solid wage growth.

Spot silver XAG= gained nearly 2% to $37.05 per ounce, reaching its highest level since February 2012.

Citi in a note said silver could rise to $40 over the next six to 12 months.

"We expect silver availability to tighten on consecutive years of deficit, sticky stockholders requiring higher prices to sell, and robust investment demand," it added.

Platinum XPT= was up 1.5% to $1,264.61 and palladium XPD= rose 1.7% to $1,047.54.