* Dollar up on talk Trump might pick policy hawk for Fed
* Palladium off highest in over 16 years hit on Monday
* GRAPHIC-2017 asset returns: http://tmsnrt.rs/2jvdmXl (Updates prices; adds comment, NEW YORK to dateline)
By Renita D. Young and Zandi Shabalala
NEW YORK/LONDON, Oct 17 (Reuters) - Gold prices fell to a one-week low on Tuesday on speculation that the eventual successor to U.S. Federal Reserve Chair Janet Yellen will favor higher interest rates.
Spot gold XAU= was down 0.6 percent at $1,286.74 an ounce by 2:16 p.m. EDT (1816 GMT), after dipping to $1,281.31, while U.S. gold futures GCcv1 for December delivery settled down $16.80, or 1.3 percent at $1,286.20 per ounce, hitting a one-week low of $1,283.20.
"Uncertainty about the next Fed chair being interpreted as being more hawkish encouraged more selling," said Ryan McKay, commodity strategist at TD Securities in Toronto.
U.S. President Donald Trump was favoring policy hawk John Taylor as the next head of the Fed, Bloomberg reported pushing the dollar higher and lifting U.S. Treasury yields. USD/
Taylor, a Stanford economist, is seen as more likely to raise rates than Yellen, which would boost the dollar and dent gold and U.S. Treasuries
Meanwhile, the U.S. Labor Department said on Tuesday import prices jumped 0.7 percent last month, the biggest gain since June 2016, pushing inflation expectations higher and increasing the likelihood of monetary policy tightening. Fed will probably need to raise rates in December and then three or four times "over the course of next year", assuming U.S. unemployment continues to fall and inflation rises, Boston Fed President Eric Rosengren said on Monday. generally loses some of its in appeal when interest rates are higher as it yields no interest.
Palladium XPD= , used mainly in auto catalytic converters, rose 0.9 percent at $981.25 per ounce, after hitting its highest since February 2001 in the previous session.
Analysts are wary about the price of palladium overheating in response to higher demand in the world's biggest auto market, China, and an expected supply deficit this year.
"While fundamentals in palladium are good, they are not supportive of the kind of gains we have seen this year," Arnold said.
Raising political tensions, Iraqi government forces captured the Kurdish-held oil city of Kirkuk on Monday, responding to a Kurdish referendum on independence with force and transforming the balance of power in the oil-producing country. the United States is not ruling out the eventual possibility of direct talks with North Korea, Deputy Secretary of State John J. Sullivan said on Tuesday, hours after Pyongyang warned nuclear war might break out at any moment. XAG= fell 0.8 percent to $17.04 an ounce, having touched a one-week low of $16.92, while platinum XPT= was up 0.3 percent at $931.24 an ounce.