PRECIOUS-Gold falls as dollar rises, investors retreat

* Cheaper U.S. Treasuries weigh on gold
    * SPDR gold holdings down more than 13 pct since Nov. 9
    * Indian budget will be critical for gold -analysts
    * Silver hits lowest since April, palladium touches 6-week

 (Updates prices; adds comment, byline, NEW YORK dateline)
    By Marcy Nicholson and Pratima Desai
    NEW YORK/LONDON, Dec 20 (Reuters) - Gold fell on Tuesday as
the dollar rose and investors sold on expectations of stronger
global economic growth and higher U.S. interest rates, while
deadly incidents in Turkey and Germany failed to spur safe-haven
    Spot gold was down 0.7 percent at $1,131.18 an ounce
by 2:51 p.m. EST (1951 GMT), after hitting a session low at
$1,125.23, not far from last week's 10-1/2-month low of
$1,122.35, its lowest since early February. U.S. gold futures
 settled down 0.8 percent at $1,133.60. 
    Gold prices came off their session lows as the U.S. dollar
 pared gains from 14-year highs. The greenback was buoyed
by comments from Federal Reserve Chair Janet Yellen that
reinforced expectations for a faster pace of U.S. interest rate
increases next year than had been expected.  
    "Chair of the Fed Yellen yesterday reinforced Fed rate hike
plans and headwinds persist for gold holders for now," said
George Gero, managing director at RBC Wealth Management.
    "It's all about the dollar as usual; also higher bond yields
are not only anti-inflationary but competitive to gold holders."
    Rising U.S. rates could mean further gains for the U.S.
currency, which when it rises makes dollar-denominated
commodities more expensive for holders of other currencies.
    Higher U.S. Treasury yields mean it is cheaper for investors
to buy U.S. government bonds, which like gold are seen as
risk-free. But unlike gold which earns nothing and costs to
insure and store, Treasuries earn regular coupons.
    "The Fed was more hawkish than we expected ... But it is
surprising not to see some safe-haven buying after the events in
Berlin and Turkey," said Societe Generale analyst Robin Bhar.
    Investor confidence in the global economy is reflected in
holdings of the SPDR Gold Trust, the world's largest
gold-backed exchange-traded fund, which at 26.624 million ounces
on are down more than 13 percent since Nov. 9. 
    Also weighing on gold is the prospect of weaker physical
demand in top consumer India where retail demand has faltered
due to the government's move to scrap high-value currency notes.
    "Despite attractive price levels, consumers in India have
stayed away. This suggests to us that the gold market faces a
fragile floor," Standard Chartered analysts said in a note. 
    Silver turned up 0.3 percent at $16.02 an ounce after
tapping $15.59, its lowest since April.
    Platinum also turned higher and was up 0.2 percent at
    Palladium lost 1.8 percent at $664.75 an ounce after
reaching $660.97, its lowest since Nov. 9.    

 (Additional reporting by Swati Verma and Nallur Sethuraman in
Bengaluru; Editing by Louise Heavens and Meredith Mazzilli)