* U.S., European shares fall on investor caution
* Dollar index touches 2-month highs on safety bids
* U.S. Presidential race tight before Tuesday vote
* Gold steadies after slid, holds above key technicals
NEW YORK, Nov 5 World stocks fell and the dollar firmed on Monday as investors either moved to the sidelines or favored low-risk assets before Americans choose their president and while China starts a leadership transition and Greece faces a fraught vote to secure fresh rescue funds.
Investors are nervous whether the world's biggest economy will avert a shock as Washington will contend with the year-end expiration of $600 billion in spending cuts and tax hikes -- known as the "fiscal cliff" -- after the presidential contest.
"People are pausing ahead of the election and what that means for the fiscal cliff," said Jim Paulsen, chief investment officer at Wells Capital Management in Minneapolis.
Opinion polls show the race between President Barack Obama and Republican challenger Mitt Romney remains neck-and-neck at the start of the last day of campaigning, and the uncertainty over the outcome left financial markets jittery.
Safe-haven bids pushed the U.S. dollar to two-month highs against a basket of major currencies and German two-year government bond yields dropped below zero for the first time in two months.
The Dow Jones industrial average was down 35.10 points, or 0.27 percent, at 13,058.06. The Standard & Poor's 500 Index was down 5.21 points, or 0.37 percent, at 1,408.99. The Nasdaq Composite Index was down 3.44 points, or 0.12 percent, at 2,978.69.
European shares were down 0.6 percent having ended the previous week at a two-week high.
The MSCI world shares index was 0.5 percent lower as Tokyo's Nikkei index closed 0.5 percent weaker followed on from Friday's Wall Street sell-off.
Benchmark U.S. 10-year Treasury notes were up 9/32 in price at 1.686 percent, down 3 basis points from late on Friday.
In commodity markets, Brent crude oil slipped 20 cents to $105.48 per barrel weighed down by a strong dollar and demand destruction after Sandy, a deadly storm that pummeled the U.S. Northeast a week ago.
In line with the broader market caution, gold steadied at $1,683.50 after Friday's 2 percent plunge.