December 1, 2017 / 11:57 AM / in a year

PRECIOUS-Gold briefly jumps 1.2 pct as Flynn probe roils markets

    * Gold hits session high as U.S. dollar, stocks drop
    * U.S. dollar, stocks drop on report of Flynn testimony
    * Silver up after hitting 8-wk low on Thursday
    * Gold in narrowest range in 12 years:

 (New throughout, updates prices, market activity and comments;
adds second byline, NEW YORK dateline)
    By Renita D. Young and Zandi Shabalala
    NEW YORK/LONDON, Dec 1 (Reuters) - Gold jumped on Friday as
the dollar and U.S. stocks fell on an ABC news report that
former national security adviser Michael Flynn was prepared to
tell investigators that Donald Trump directed him to make
contact with Russians during last year's presidential election
    Shares on Wall Street fell immediately after the report.
Investors feared the political news could affect whether the
Senate will pass a tax bill backed by Trump.             
    Within moments, however, gold came off its highs and U.S.
stocks bounced off lows. Michael Matousek, head trader at U.S.
Global Investors in San Antonio, noted that U.S. Senate
Republican leader Mitch McConnell said there were enough votes
to pass the tax bill in that chamber.             
    The report about Flynn "was a good catalyst for people who
were anticipating buying gold. It sparked the fear trade,"
Matousek said. Reuters has not verified the ABC News report,
which cited a Flynn confidant.             
    Spot gold        was up 0.3 percent at $1,278.01 an ounce by
1:39 p.m. EST (1839 GMT), after peaking to $1,289.50. The yellow
metal was poised to end the week 0.8 percent lower. 
    U.S. gold futures for February delivery         settled up
$5.60, or 0.4 percent, at $1,282.3 per ounce. 
    "Tax reform would be negative for gold," said Commerzbank
analyst Carsten Fritsch, "because this will lead to higher
inflation and more Fed rate hikes."
    He said the recent weakness in gold could be attributed to
an ongoing rally in global equity markets, boosted by "economic
optimism and hopes regarding tax reform".
    U.S. stocks this week hit record highs on bets that U.S. tax
reforms would go through.            
    On Thursday, gold fell 0.7 percent to touch its lowest since
Nov. 6 at $1,270.11. 
    A lack of clear drivers has kept gold between $1,265 and
$1,300 an ounce throughout November, its narrowest monthly range
in 12 years.
    Silver        dipped 0.6 percent to $16.33 after hitting
$16.22 an ounce, its lowest since Aug. 8. It was down 3.8
percent for the week. 
    Palladium        rose 1.5 percent to $1,021.60 and was up
2.4 percent for the week. Platinum        was down 0.3 percent
at $938.40 an ounce and was off 0.2 percent on the week. 
    Separately, federal prosecutors said Flynn pleaded guilty to
lying to the Federal Bureau of Investigation and also admitted
to speaking with a top member of the Trump transition team
regarding his communications with Russia's ambassador to the
United States.

 (Additional reporting by Vijaykumar Vedala and Arpan Varghese
in Bengaluru; Editing by David Gregorio and David Evans)
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