Gold falls from three-and-half month high, Trump speech on the radar

By Marcy Nicholson and Pratima Desai

NEW YORK/LONDON (Reuters) - Gold fell after tapping a 3-1/2-month high on Monday as U.S. Treasury yields rose and investors waited for U.S. President Donald Trump to outline plans for tax cuts, infrastructure spending, levies on imports and foreign policy.

Spot gold (XAU=) turned down 0.1 percent to $1,255.22 an ounce by 2:43 p.m. EST (1943 GMT), after rising to $1,263.80, the highest since Nov. 11, but prices failed to hold above the 200-day moving average at $1,260.74.

U.S. gold futures (GCcv1) settled up 0.04 percent at $1,258.80.

Trump is due to address Congress on Tuesday.

"What he reveals might be important for gold. For example, if he announces significant fiscal easing, that would raise inflation expectations and lead investors into gold," said Danske Bank analyst Jens Pederson.

"But the border adjustment tax (import tax) could push the dollar higher and that could be negative for gold ... The whole area of foreign policy may mean more political uncertainty and that's positive for gold."

Bullion prices briefly rose to 3-1/2-month highs after Trump said he would propose a budget that would ramp up spending on defence, but seek savings elsewhere to pay for it.

"As far as tomorrow's speech goes, the focus will be on whether or not Trump can actually lay out the specifics on what he intends to do," said Shree Kargutkar, associate portfolio manager at Sprott Asset Management in Toronto.

Analysts also expect nervousness ahead of elections in the Netherlands, France and Germany to help to buoy gold prices over the course of this year but say that U.S. interest rates are also important.

Higher U.S. rates could mean a stronger U.S. currency, which makes dollar-denominated metals more expensive for holders of other currencies.

Holdings of the largest gold-backed exchange-traded fund, New York's SPDR Gold Trust (HLDSPDRGT=XAU), have also risen more than 5 percent this month.

Spot silver (XAG=) fell 0.3 percent to $18.29 an ounce, after rising to $18.48, the highest since Nov. 11.

Platinum (XPT=) gained 0.4 percent at $1,026.99, after jumping to a five- month high at $1,044.10.

Palladium (XPD=) rose 1.7 percent to $781.25.

Societe Generale sees robust demand for palladium auto catalysts from Chinese car manufacturers.

"The average palladium loading on a Chinese gasoline car is set to grow again as Chinese standards for light duty gasoline vehicles are implemented nationally," said Societe Generale analyst Robin Bhar.

"The demand outlook remains less compelling for platinum due to its exposure to diesel technology, which remains under scrutiny from the emissions scandal."

(Additional reporting by Nallur Sethuraman in Bengaluru; Editing by Louise Heavens and Chizu Nomiyama)