Gold slips on firmer dollar; political uncertainty supports

By Marcy Nicholson and Zandi Shabalala

NEW YORK/LONDON (Reuters) - Gold dipped on Thursday as the dollar strengthened, but losses were capped by continuing economic uncertainty around Britain's departure from the European Union and approaching French elections.

The potential for the rise of the far right in European elections this year, along with British Prime Minister Theresa May formally triggering divorce proceedings from the EU on Wednesday has served to enhance gold's appeal as a safe-haven investment, negating some of the effects of a strong dollar.

"We might see support from the French elections if the first round surprises us by the results being better than expected for (far right leader) Marine Le Pen. That might give a little bit of a boost for gold," said Bernard Dahdah, a precious metals analyst at Natixis.

Spot gold (XAU=) was down 0.5 percent at $1,245.41 an ounce by 1:54 p.m. EDT (1754 GMT) and U.S. gold futures (GCcv1) settled down 0.7 percent at $1,245.

"The market seemed to take the notification of the (triggering of) Article 50 in the UK relatively smoothly, but I suspect the worst is yet to come on that," said ANZ analyst Daniel Hynes.

"But certainly, there was a tiny bit of safe-haven buying."

The dollar rose to a nine-day high against a basket of currencies on Thursday. A stronger greenback makes dollar-denominated gold more expensive for holders of other currencies, potentially lowering demand. [USD/]

The dollar was also boosted by Chicago Fed President Charles Evans, who said he was in line with most of his colleagues in supporting further interest rate increases this year.

"The market has priced in two interest rate increases this year, but if we see three there could be downside pressure towards gold prices," said ETF Securities analyst Nitesh Shah.

Still, RBC Capital Markets sees support for bullion prices.

"Whether a good indicator or not, we think the U.S. healthcare legislation saga led the market to at least partially rethink the prospects of broad reforms across tax, trade, and

other economically relevant policies in the U.S.," RBC said in a note.

"Between this and the UK triggering Article 50, we think there are plenty of risks on both sides of the Atlantic in 2017 to keep gold supported at current (or somewhat higher) levels despite a number of otherwise bearish macro headwinds."

In other precious metals, spot silver (XAG=) slipped 0.2 percent to $18.16 an ounce, having hit a four-week high of $18.29.

Platinum (XPT=) turned down 0.06 percent to $950.95, while palladium (XPD=) was up 0.8 percent at $796.50.

(Additional reporting by Arpan Varghese and Swati Verma in BENGALURU; Editing by David Goodman and Tom Brown)