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 hit fresh nine-year highs on Monday, supporting the dollar and reducing the appeal of non-yielding bullion.
However, rising nearby yields flattened the U.S. treasury 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 $1,272.79 per ounce at 1003 GMT, having hit a one week low of $1,270.56. U.S. gold futures for December delivery fell 0.5 percent to $1,272.70.
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, strong German economic growth data drove the euro to a three-week high versus the dollar and gave European stocks a lift, but Asian stocks were subdued following losses in U.S. equities on Monday.
Underpinning gold, 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.
Looking ahead, investors will keep an eye on a European Central Bank-hosted conference in Frankfurt on Tuesday, where ECB chief Mario Draghi, U.S. Federal Reserve Chair Janet Yellen, Bank of Japan Governor Haruhiko Kuroda and Bank of England head Mark Carney will form an all-star panel.
Among other precious metals, silver fell 0.7 percent to $16.93 per ounce, while platinum was down 0.3 percent at $929.40.
Palladium recovered from near two-week lows hit earlier in the session but was down 0.4 percent at $985.22 an ounce.
(Additional reporting by Vijaykumar Vedala in Bengaluru; Editing by Adrian Croft)