PRECIOUS-Gold slides to 5-1/2-month low on dollar surge

* Gold prices pressured by rallying dollar index

* Holdings of largest gold ETF hit lowest since June

* GRAPHIC-2016 asset returns: (Adds comment, byline, NEW YORK dateline; updates prices)

NEW YORK/LONDON, Nov 18 (Reuters) - Gold on Friday fell to its lowest level since late May as the dollar surged to its highest in more than 13-1/2 years on expectations for a U.S. rate hike next month and higher fiscal spending from U.S. President-elect Donald Trump’s incoming administration.

The dollar was on track for its best fortnight since 1988 against the yen, and hit its highest level since early 2003 against a basket of currencies, as Trump’s win stoked talk of tax cuts and fresh investment in infrastructure to boost the U.S. economy.

That weighed on gold, which is priced in dollars, sending it to its lowest since May 30 at $1,203.52 an ounce.

Spot gold was down 0.6 percent at $1,208.71 by 3:06 p.m. EST (2006 GMT). The 50-day moving average appeared on track to cross below the 200-day moving average above the market, potentially forming a “death cross,” which technical traders often consider a bearish signal.

U.S. gold futures for December delivery were settled down 0.7 percent at $1,208.70, after falling to $1,201.30, their weakest since mid-February.

“Given these headwinds, gold is holding its own relatively well at the moment,” Commerzbank analyst Daniel Briesemann said. “You could easily argue for lower prices, given the sharp appreciation of the dollar and the sharp rise in bond yields.”

Spot prices have fallen more than 1 percent this week and are down by more than $130 an ounce from their post-election peak, hurt by the jump in the dollar and a surge in U.S. Treasury yields.

U.S. Treasuries resumed a selloff that left benchmark yields on track to post their steepest two-week increase in 13 years.

“Benchmark global bond yields have been rising, further damaging the appeal of the noninterest-bearing precious metal,” said Fawad Razaqzada, technical analyst for

“But it is the dollar which is exerting the most pressure on the buck-denominated gold.”

Fed Chair Janet Yellen said on Thursday in congressional testimony that Trump’s election has done nothing to change the Fed’s plans for a rate increase “relatively soon”.

Holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Shares, have fallen by nearly 30 tonnes since the U.S. election.

Silver dropped by as much as 1.5 percent to $16.42 an ounce, its lowest since June 8, while platinum fell as much as 2.4 percent to $911, the lowest level since late February.

Palladium was up 0.03 percent at $726.70, and set for a third weekly rise on hopes that higher U.S. infrastructure spending could boost demand. (Additional reporting by Apeksha Nair and Nallur Sethuraman in Bengaluru; Editing by Dale Hudson and Sandra Maler)