* Central bank heads' comments pressure dollar, lift gold
* Silver rises to 2-1/2-month high
* Geopolitical risks continue to underpin bullion (Recasts to include new milestone, updates prices; adds comment, second byline, NEW YORK dateline)
By Marcy Nicholson and Zandi Shabalala
NEW YORK/JOHANNESBURG, Aug 28 (Reuters) - Gold rallied to a 9-1/2-month high on Monday, breaching $1,300 per ounce as the dollar fell and the euro rose after the head of the European Central Bank (ECB) said that the euro zone's economic recovery had taken hold at a meeting of central bankers.
At the meeting in Jackson Hole, Wyoming, the ECB's Mario Draghi said the bank's ultra-loose monetary policy was working and the euro zone's economic recovery had taken hold, refraining from commenting on the euro's recent strength. pushed the euro to its highest in more than 2-1/2 years against the U.S. dollar, while the dollar index .DXY fell to its lowest since May 2016. FRX/
"Draghi did not refer to the strong euro being a brake on policy normalization - this is what triggered the rally in the euro and the price reaction in gold mirrors what the currencies did," Julius Baer analyst Carsten Menke said.
Spot gold XAU= rose 1.4 percent at $1,309.25 an ounce by 2:01 p.m. EDT (1801 GMT), after rising to its highest since early November at $1,309.98.
U.S. gold futures GCcv1 settled up 1.3 percent at $1,315.30.
Many traders were away from their desks due to a British public holiday.
At Jackson Hole, U.S. Federal Reserve Chair Janet Yellen made no reference to U.S. monetary policy but instead focused on financial regulations, leading traders to expect interest rates to be raised more slowly. think that may have got investors more comfortable to continue doubting the inflation story and whether they'll be able to hike (interest rates)," said Ryan McKay, associate commodities strategist for TD Securities.
"Once we got to $1,300 and tested it for the fourth or fifth time, it finally gave way," McKay said, adding that automatic buy orders pushed prices above that level.
Gold is highly sensitive to rising U.S. rates, which lift the opportunity cost of holding non-yielding assets such as bullion while boosting the dollar, in which it is priced.
Further supporting gold was geopolitical uncertainty sparked by U.S. President Donald Trump's renewed threat to scrap the North American Free Trade Agreement. raised their net long position in COMEX gold for the sixth straight week in the week to Aug. 22. CFTC/
In other precious metals, silver XAG= was up 2 percent at $17.39 an ounce, after touching its highest since early June at $17.45.
Platinum XPT= rose 1.3 percent to $984.50 and palladium XPD= edged up 0.5 percent to $934, close to a 16-1/2-year high of $940.50 hit on Friday.