PRECIOUS-Gold falls to lowest since July ahead of Fed meeting

    * Dollar index steady ahead of Fed meeting
    * GRAPHIC-2017 asset returns:
    * Platinum discount to palladium at deepest since April 2001

 (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 12 (Reuters) - Gold prices retreated to
a near five-month low on Tuesday as investors braced for a
widely expected U.S. interest rate increase this week and looked
for clues about further hikes from the Federal Reserve.
    Spot gold        fell 0.1 percent to $1,240.64 an ounce by
1:36 p.m. EST (1836 GMT), after hitting its lowest since July 20
at $1,235.92.
    U.S. gold futures         for February delivery settled down
$5.20, or 0.4 percent, at $1,241.70 per ounce. 
    Global markets are watching the U.S. central bank's two-day
meeting for clues about the Fed's future rate path.
    "The rise is already in the price so it's more about the
outlook the Fed gives," said ABN Amro commodity strategist 
Georgette Boele.
    Gold is highly sensitive to rising U.S. interest rates as
these increase the opportunity cost of holding non-yielding
bullion and boost the dollar, in which it is priced.
    Higher equity prices and an increased interest in crypto
currencies, including bitcoin, have likely stolen the shine from
gold lately, causing prices to break below the most recent
trading range, said Josh Graves, senior commodities strategist
at RJO Futures in Chicago.
    Between mid-October and early-December, gold prices had
stayed between $1,265 and $1,300 an ounce. 
     "The path of least resistance is down on the FOMC meeting,"
Graves said of the metal's response to outgoing Fed Chair Janet
Yellen's last meeting in charge. "We will likely see continued
selling down to a psychological $1,200 area before you see any
    In other markets, U.S. stocks hit record levels as Boeing
rose and bank stocks gained, while the dollar strengthened.
    Oil prices slipped after peaking above $65 a barrel for the
first time since mid-2015 on an unplanned shutdown of the UK's
biggest North Sea oil pipeline.                  
    Among other precious metals, silver        dropped 0.3
percent at $15.66 an ounce.
    Platinum        fell for its eight straight session, down
0.9 percent at $876.60 an ounce, after earlier touching its
lowest since February 2016 at $868.80.
    Platinum is more heavily used in diesel vehicles, which have
fallen out of favor since Volkswagen's emissions-rigging
    Its sister metal, palladium, has benefited from the switch
to gasoline engines and expectations for growth in hybrid
gasoline-electric vehicles.
    Palladium        was unchanged at $1,010 per ounce.
    The platinum discount to palladium widened to around $120
last week, the steepest since April 2001.             

 (Additional reporting by Apeksha Nair in Bengaluru, editing by
Louise Heavens and Adrian Croft; Editing by David Gregorio)