By Maytaal Angel
LONDON (Reuters) - Gold hit a one-week low on Tuesday after U.S. Treasury yields touched fresh highs as investors priced in a rate hike next month, but the precious metal's losses were limited by rising uncertainty over the U.S. growth outlook.
Yields on two-year U.S. treasuries touched fresh nine-year highs on Monday, supporting the dollar and reducing the appeal of non-yielding bullion.
However, rising nearby yields flattened the yield curve, in part reflecting market wagers that rising rates this year and next will eventually slow the economy.
These fears, coupled with uncertainty over the outlook for U.S. tax reforms, kept gold's losses in check, hitting investor risk appetite and increasing gold's appeal as a safe haven asset.
"These levels in gold are quite well supported because real U.S. rates are going to remain very depressed and potentially negative going into next year as inflation starts to ramp up in the U.S," said Martin Arnold, strategist at ETF Securities.
Spot gold was down 0.4 percent at $1,272.77 per ounce at 1452 GMT, having dropped to a one-week low of $1,270.56. U.S. gold futures for December delivery fell 0.6 percent to $1,271.90.
Congressional Republicans pushed ahead on Monday with a U.S. tax code overhaul as a Senate panel considered the issue, but risks lay ahead with major intra-party disputes unsettled. A failed tax overhaul would hit risk appetite and benefit gold.
In the wider markets, U.S. stocks opened lower for the fifth straight day as worries about Republican tax plans and the economy's ability to deal with more interest rate hikes dented appetite for assets perceived as risky.
Four of the world's top central bankers promised on Tuesday to keep openly guiding investors about future policy moves as they slowly withdraw the huge monetary stimulus rolled out during the financial crisis.
Elsewhere, hedge funds and money managers raised their net long position in COMEX gold by 7,027 contracts to 173,562 contracts in the week to Nov. 7, U.S. Commodity Futures Trading Commission (CFTC) data showed on Monday.
That marked the first time speculators had raised their net long position in eight weeks.
Among other precious metals, silver fell 1 percent to $16.86 per ounce, while platinum was down 1 percent at $920.74. Palladium was down 0.5 percent at $984.30 an ounce, recovering from near two-week lows hit earlier in the session.
(Additional reporting by Vijaykumar Vedala in Bengaluru; Editing by Mark Heinrich)