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Gold slips from late 2016 highs as dollar rebounds

Gold bullion is displayed at Hatton Garden Metals precious metal dealers in London, Britain July 21, 2015. REUTERS/Neil Hall/Files

By Devika Krishna Kumar and Zandi Shabalala

NEW YORK/LONDON (Reuters) - Gold fell nearly 1 percent on Tuesday, sliding from a two-month peak as investors took stock of U.S. President Donald Trump's first policy moves and the dollar stabilised after plumbing seven-week lows this week.

Trump formally withdrew from the Trans-Pacific Partnership trade deal on Monday and told U.S. manufacturing executives he would impose a hefty border tax on firms that import products after moving American factories overseas.

"It's all been flagged and it's all playing out according to the well-rehearsed script of Trump and his advisers," Robin Bhar, Societe Generale's head of metals research, said.

"The high in gold is an opportunity to take a bit of profit," Bhar said, adding that the price was stuck in a $1,120-$1,220 range.

Trump's protectionist statements and a lack of detail on policy have led some investors to opt for gold, which is often seen as an alternative investment in times of geopolitical and financial turmoil. It rose to its highest level since Nov. 22 during Tuesday's session before giving back gains.

Spot gold (XAU=) was down 0.77 percent at $1,208 an ounce after peaking at $1,219.59. U.S. gold futures (GCcv1) slipped 0.4 percent to settle at $1,210.8.

The dollar index (.DXY), which measures the greenback against a basket of currencies, recovered to about 100.330 after falling to a seven-week low of 99.899 in the previous session.

In 2017, precious metals prices are projected to fall 7 percent mainly due to weak investment demand, prospects of a stronger dollar, and rising real interest rates, the World Bank said in its quarterly Commodity Markets Outlook on Tuesday.

Gold prices are expected to decline 8 percent, it said.

Analysts said the gold market was seeking clarity from Trump's administration on tax and spending policies that could impact growth and provide clues on the direction of U.S. interest rates.

Gold is highly sensitive to rising U.S. rates, which increase the opportunity cost of holding the non-yielding asset while boosting the dollar, in which it is priced.

Buying in gold had increased in early December but volume traded on the Shanghai Gold Exchange has eased continually since then, Standard Chartered said in a note. Typically, during a strong season, gold buying rises as early as eight weeks ahead of the Lunar New Year, which falls on Saturday, Jan. 28.

Silver (XAG=) lost 0.76 percent to $17.07 per ounce.

Palladium (XPD=) was up 1.3 percent at $785.97 an ounce after hitting $796.20, its highest since May 2015.

"Palladium ... enjoys the strongest market fundamentals among all the four precious metals we cover. Specifically, this relates to the chronic deficits of the palladium market, which we expect will be repeated in 2017," Metals Focus said in a note.

Platinum (XPT=) also rose, hitting the highest since Nov. 10 at $1,004.50.

(Additional reporting Arpan Varghese and Nallur Sethuraman in Bengaluru; editing by Dale Hudson and Chizu Nomiyama)