* Metals surge, zinc at highest in a decade
* U.S. political uncertainty weighs on stock prices
* Dollar falters as N.Korea weighs; Jackson Hole meeting in focus
* Investors wary as U.S., South Korea begin military drills (Updates to close of U.S. markets)
By Dion Rabouin
NEW YORK, Aug 21 (Reuters) - A gauge of world stock indexes edged up after touching a 5-1/2-week low on Monday as geopolitical uncertainty kept gains in check but metals prices dazzled, helped in part by Chinese demand.
Zinc rose to its highest in a decade, copper hit a nearly three-year peak and iron ore rose to gain nearly 15 percent in the last three sessions.
U.S. stocks were mixed as tensions simmered between the United States and North Korea. Doubts also lingered about the ability of U.S. President Donald Trump's administration to push through a pro-business agenda of tax cuts and infrastructure spending, and lower oil prices dragged on the market.
The Dow Jones Industrial Average rose 29.24 points, or 0.13 percent, to 21,703.75, the S&P 500 gained 2.82 points, or 0.12 percent, to 2,428.37 and the Nasdaq Composite dropped 3.40 points, or 0.05 percent, to 6,213.13.
Stock futures trading volume fell in the United States during the two hours that traders left their offices to get a glimpse of the first total solar eclipse to unfold across the country in nearly a century.
About 174,000 S&P 500 e-mini futures futures changed hands over the two-hour period ending 3:30 p.m. ET on Monday, down about 46 percent for the comparable period last year.
European stocks closed lower as bank shares dropped in risk-off trading. The losses trickled over from Asian trading with investors shedding risky assets as joint U.S. and South Korean military drills began.
Analysts said market participants were also awaiting an upcoming speech from Trump on U.S. strategy in Afghanistan later in the evening.
"Some people are a little apprehensive and not sure what’s going to be said," said Ian Winer, head of equities at Wedbush Securities in Los Angeles.
Additionally, Winer said, without much in the way of U.S. economic data or other headlines, "it’s a quiet Monday and people are still feeling the effects of last week. Now that earnings are over there’s just not a whole lot of catalysts."
MSCI's all-country world index rose 0.09 percent after earlier touching its lowest since July 12.
Chinese and emerging market shares rose, boosted by mainland China shares, which added to gains following the Shanghai stock index's biggest weekly advance in four months last week.
Hopes for Chinese infrastructure spending and a potential demand boost down the road from electric cars helped zinc hit its highest since October 2007 at $3,180.50 a tonne.
Copper rallied to its highest since November 2014 and China's iron ore futures soared more than 4 percent.
Gold prices turned higher.
The geopolitical fears also helped boost the Japanese yen against the dollar. The U.S. currency has fallen for four straight sessions against the safe-haven yen, which is sought for its liquidity in times of market stress.
The dollar was last down 0.25 percent against the yen at 108.91 yen.
U.S. Treasury yields were little changed ahead of the Federal Reserve's conference in Jackson Hole, Wyoming, at the end of the week.
Investors were looking to European Central Bank chief Mario Draghi's comments at the event, although sources told Reuters last week he would not deliver any fresh policy messages.
Fed Chair Janet Yellen's keynote speech will also be scoured for clues on the U.S. central bank's next move.
"We're hopefully getting a couple of more data points to see where the Fed takes their temperature on where they're feeling the economy is at this juncture so that we can anticipate if something happens in the fourth quarter or not," said Wayne Wicker, chief investment officer at ICMA-RC in Washington, D.C.
The benchmark U.S. 10-year Treasury note rose 3/32 in price to yield 2.18 percent.
Oil prices fell after big gains on Friday, which had been triggered by data showing U.S. drillers cut the number of oil rigs.
U.S. crude futures fell to $47.38 per barrel, while Brent futures slipped to $51.61 per barrel.
Editing by Meredith Mazzilli and Nick Zieminski