PRECIOUS-Higher dollar pressures gold, uncertainty supports

*

SPDR

gold holdings up more than 5 pct since Jan 31. * Support near $1,221/oz, the 21-day moving average (Recasts, adds comment and

London

dateline) By

Pratima Desai

LONDON, Feb 21 (

Reuters

) -

Gold

fell on Tuesday as reinforced expectations of an increase to U.S. interest rates next month pushed the dollar higher, though political and economic uncertainty in Europe and the

United States

are likely to offer continued price support. Spot gold was down 0.7 percent at $1,229.60 an ounce by 1016 GMT but has still gained more than 6 percent since the start of the year. The dollar strengthened after

Federal Reserve

members pointed to the potential for higher U.S. rates next month, making commodities priced in the currency more expensive for non-U.S. buyers. "Gold is capped by the likelihood that U.S. monetary policy will be tighter at some stage, potentially in March," said

Societe Generale

analyst

Robin Bhar

. "There is a lot of political uncertainty, there are safe-haven flows going into gold."

Bhar

added that gold is also an investment hedge against corrections in what look to be overvalued equities. Investor demand for gold can be seen in the world's largest gold-backed exchange-traded fund,

SPDR Gold Trust

, holdings of which have risen by more than 5 percent to 27.044 million ounces since Jan. 31. Major U.S. indices -- the

Dow Jones

Industrial Average and the S&P 500 -- have hit consecutive record highs in recent days. "Gold's resilience is all the more impressive considering U.S. equities are setting record after record, while the dollar is also fairly strong," said

INTL

FCStone analyst Edward Meir. Meir added that support comes from a "myriad political and economic uncertainties" that lie ahead in 2017. Traders' attention on Tuesday will focus on speeches by a number of Federal Reserve presidents, looking for clues on the timing of U.S. rate rises. Also on the radar is U.S. President Donald Trump's address to Congress on Feb. 28, which analysts and traders hope will offer detail on infrastructure spending and tax cuts. Technical support is around the 21-day moving average near $1,221 an ounce, while $1,250 presents a major barrier, analysts say. A break higher will meet Fibonacci resistance at $1,255. Elsewhere, silver fell 0.8 percent to $17.86 an ounce, platinum lost 1.2 percent to $988.25 and palladium ceded 1 percent to $764.40. (Additional reporting by

Arpan Varghese

in Bengaluru; Editing by David Goodman)
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