By Frank Tang and Jan Harvey
NEW YORK/LONDON (Reuters) - Gold prices were slightly lower on Friday, paring losses on safe-haven buying as equity markets slid after Ukraine said its forces had engaged a Russian armored column on Ukrainian soil in what appeared to be a major military escalation.
Palladium rose to a fresh 13-year high on supply concerns and some safe-haven demand due to renewed Russia-Ukraine tensions, analysts said.
Investors bought bullion and U.S. Treasuries after Ukraine said its forces had attacked and partly destroyed a Russian armored column that crossed into Ukrainian territory. Moscow said its forces had not crossed into Ukraine, and accused Kiev of trying to sabotage deliveries of aid. (Full Story)
"The news definitely helps gold reverse higher and shows that gold is very susceptible to geopolitical tensions," said Phillip Streible, senior commodities broker at RJ O'Brien. "When these developments cool, you will see the gold market come right back down."
Spot gold XAU= was down 0.7 percent at $1,303.90 an ounce by 2:15 p.m. EDT (1815 GMT). It traded as low as $1,292.40 just before the Ukraine headlines.
For the week, gold was down 0.4 percent, its third decline in 4 weeks.
U.S. COMEX gold futures for December delivery GCZ4 settled down $9.50 at $1,306.20 an ounce, with trading volume on track to finish sharply higher than its 30-day average, preliminary Reuters data showed.
Earlier in the session, bullion was down more than 1 percent because of weak physical demand, gains in U.S. equities and weak U.S. producer inflation data. But stocks fell after the news from Ukraine, while benchmark 10-year U.S. Treasury bond prices rose.
Technical support could further lift prices after gold breached its 50- and 100-day moving averages following Friday's rally.
In gold investment news, hedge fund Paulson & Co maintained its stake in the world's biggest gold-backed exchange-traded fund, SPDR Gold Trust GLD, in the second quarter, while Soros Fund Management LLC sharply boosted its investment in gold mining stocks.
Among other precious metals, silver was down 1.4 percent at $19.52 an ounce.
The silver market entered a new era in benchmarking on Friday after a regulatory drive for more transparency in price setting brought the 117-year-old silver 'fix' to an end.
Palladium rose to a 13-year high at $894, its highest price since February 2001, surpassing its previous 13-year high at $887.90 reached in July.
The metal was boosted by supply concerns due to geopolitical tensions in the world's largest producer Russia and some safe-haven demand tracking gold's rebound, said HSBC precious metals analyst James Steel.
Palladium was last up 1.1 percent to $890.25 an ounce, while platinum XPT= dropped 0.4 percent to $1,450.99.
(Additional reporting by A. Ananthalakshmi; Editing by David Evans/William Hardy/Susan Fenton/Chizu Nomiyama)
