Newcastle had a bid rejected in January for their former winger, although preliminary talks over a transfer this summer have been held between the two clubs - yet any potential deal could come down to the funds they'd receive for the transfer of Matt Ritchie.
According to Sky Sports journalist Keith Downie (via Twitter), a potential deal would reportedly cost the club £22m – which is a hefty portion of the Magpies' transfer budget for the summer window. A deal may also hinge on Matt Richie’s potential move to Stoke City, which would earn Newcastle around £15m.
Rafael Benitez is reportedly keen to bolster his attacking options and has returned with a new bid to bring 26-year-old Townsend back to St James’ Park.
Townsend joined Newcastle from Tottenham in January 2016 and went on to score four goals in 13 games under the Spaniard. Following the Magpies' relegation at the end of the 2015/16 Premier League season, Palace triggered the winger’s £13m release clause and brought him to London.
Townsend signed a five-year contract at Selhurst Park and has made a total of 72 appearances for Palace, scoring five goals.
Newcastle remain busy in the transfer market despite limited resources to bring in new players. The club have just completed the signing of South Korea international Ki Sung-yeung on a two-year deal, which is their second signing of the summer following Martin Dubravka's deal.