December 5, 2017 / 10:50 AM / a year ago

PRECIOUS-Gold at two-month low as dollar bounces on U.S. tax plan support

    * Gold slides to new low; silver dips to 4-1/2-month low
    * Dollar flourishes for second straight day
    * Tech stocks see bounce on U.S. tax bill optimism
    * GRAPHIC-2017 asset returns:

 (Recasts with U.S. trading, updates prices, bullets adds
analyst's comment, adds NEW YORK to dateline)
    By Renita D. Young and Jan Harvey
    NEW YORK/LONDON, Dec 5 (Reuters) - Gold dropped 1 percent to
a two-month low on Tuesday as the dollar rose against a basket
of currencies and U.S. stocks rebounded as investors assessed
details of the U.S. tax overhaul legislation. 
    The U.S. dollar gained for a second consecutive session and
U.S. technology stocks bounced, both benefiting from optimism
surrounding the U.S. tax plan. The House of Representatives on
Monday voted to go to conference with the Senate on their
differing versions of the tax legislation, setting up formal
negotiations on the bill.                          
    Spot gold        was down 1 percent at $1,263.02 an ounce by
1:49 p.m. EST (1849 GMT), after dropping to a two-month low of
    U.S. gold futures        for February delivery settled down
$12.80, or 1 percent, at $1,264.90 per ounce. 
    "With this move today, that opens the door to more
liquidation until you get more geopolitical risk and uncertainty
in the world," said Josh Graves, senior commodities strategist
at RJO Futures in Chicago.
    Psychological support could come in at around $1,250 an
ounce, Graves added.
    Gold has held broadly between $1,271 and $1,289 so far this
month, after posting its narrowest monthly range in 12 years in
November, but broke lower Tuesday. Bullion has risen 10 percent
in the year to date, but momentum stalled in the second half as
global equities rallied and an expected hike in U.S. interest
rates approached. 
    "Overall physical demand is down to multi-year lows, so even
outside the investment community, there is no real push into
gold from the likes of China and India," said Carsten Menke,
analyst at Julius Baer.
    "Without this demand spark, gold just remains very, very
sensitive to the U.S. dollar."
    A stronger dollar makes assets priced in the U.S. currency
more expensive for holders of other currencies.
    Investors also are looking towards the U.S. non-farm
payrolls report this week, the last employment figures before
the U.S. Federal Reserve's monetary policy meeting next week.
    The Fed is almost certain to raise interest rates later this
month, according to a Reuters poll of economists.             
    Gold is highly sensitive to rising U.S. interest rates,
which lift the opportunity cost of holding non-yielding bullion.
    Among other precious metals, silver        was down 1.7
percent at $16.04 an ounce, earlier sliding to a 4-1/2-month low
of $16.
    Platinum        dipped 1 percent at $914 an ounce, after
matching its Oct. 30 low of $909.50. Palladium        dropped
0.8 percent at $984.60 an ounce, after touching a 2-1/2-month
low of $979.60.
    Monday's palladium price slide came with a 12,700-ounce
reduction in exchange-traded fund holdings, Commerzbank said in
a note. "This was already the fourth major daily outflow in the
space of two weeks," it said. 

 (Additional reporting by Apeksha Nair and Arpan Varghese in
Bengaluru; editing by Gareth Jones and Chizu Nomiyama)
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