* Asian shares down about 2 percent
* Palladium hits fresh nine-month high
* Holdings in SPDR Gold Trust rise on Monday
By Eileen Soreng
BENGALURU, Oct 23 (Reuters) - Gold prices rose on Tuesday as Asian shares faltered on worries over political tensions between Saudi Arabia and Western powers, uncertainties around Brexit and Italy's budgetary woes, bolstering the metal's safe-haven appeal.
Spot gold XAU= was up 0.8 percent at $1,231.40 an ounce at 0743 GMT. On Oct. 15, the bullion touched its highest since July 26 at $1,233.26.
U.S. gold futures GCcv1 rose 0.8 percent to $1,234.50 an ounce.
"Geopolitical tensions are escalating and that has brought some safe-haven buying back into the gold market... Short positions also appear to be unwinding as a result," ANZ analyst Daniel Hynes said.
Asian shares slumped amid a cocktail of negative drivers from Saudi Arabia's diplomatic isolation to fresh worries about trade wars, with MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS down 2 percent. MKTS/GLOB
"There is still strong demand (for gold) and this is keeping the price green... The continuing tension between the U.S. and Saudi Arabia and the lacklustre picture of the global economic growth is behind the current move," Think Markets UK chief markets analyst Naeem Aslam said in a note.
The market now awaits a speech from Turkish President Tayyip Erdogan later in the day, who said he will release information about the investigation of the killing of journalist Jamal Khashoggi. the European Commission will also discuss and decide on Tuesday the next steps in the procedure for assessing Italy's 2019 draft budget. fast pace of short-covering in the past fortnight has helped lift gold prices, with volatility in risk assets, and continued fears over a trade war strengthening demand, according to Jordan Eliseo, chief economist at gold trader ABC Bullion.
"Fears over a slowdown in global growth may also support the metal, especially if markets get a sense that the U.S. Federal Reserve may slow their pace of tightening, with the potential for substantially more short-covering in the weeks ahead," Eliseo added.
The yellow metal has declined more than 10 percent from its April peak after investors preferred the dollar as the U.S.-China trade war unfolded against a background of higher U.S. interest rates.
Meanwhile, holdings at the world's largest gold-backed exchange-traded fund SPDR Gold Trust GLD rose 0.28 percent to 747.88 tonnes on Monday. GOL/ETF
Palladium XPD= was up 1 percent at $1,134.70 after marking a fresh nine-month high of $1,135.80 earlier in the session.
Palladium surged nearly 4 percent on Monday as investors were worried about the impact of any renewed sanctions on Russia, a major producer of the metal, ANZ analysts said in a research note.
"Plans by the U.S. to pull out of a nuclear weapons pact treaty with Russia could ultimately impact palladium sales at a time when the market is extremely tight," said ANZ analysts. other precious metals, silver XAG= rose 0.5 percent to $14.68 per ounce, while platinum XPT= was up 0.7 percent at $825.60 per ounce.