* Strong U.S. data briefly raises dollar, U.S. yields
* World stocks hit record high
* ETF holdings fall by most since July
(Recasts; updates prices, adds comment, adds NEW YORK to
dateline)
By Renita D. Young and Peter Hobson
NEW YORK/LONDON, Oct 3 (Reuters) - Gold on Tuesday rose
above a seven-week low as the U.S. dollar came off its highs.
Bullion was pressured earlier by strong U.S. economic data
that reinforced expectations of another U.S. interest rate
increase this year and pushed the dollar and U.S. bond yields
higher.
Spot gold was up 0.1 percent at $1,272.04 per ounce
by 3:13 p.m. EDT (1913 GMT), after the dollar flattened and U.S.
bond yields eased from earlier highs.
Gold had earlier touched $1,267.76, its lowest since Aug. 15
and down more than 6 percent from a one-year high of $1,357.54
in early September.
"The speculators don't want to take it below key levels,
because of uncertainty of the next Fed chair and how inflation
will play out after a potential December hike," said Ryan McKay,
head of commodity strategy at TD Securities in Toronto,
referring to the modest rebound in gold prices.
U.S. gold futures for December delivery settled down
$1.20, or 0.1 percent, at $1,274.60 per ounce, after hitting the
lowest in nearly a month at $1,271.
The CME's Fedwatch indicator showed markets were pricing in
a 77 percent likelihood of a December rate rise after Monday's
data showed a surge in U.S. manufacturing activity.
U.S. and world stocks also rose to records as a positive
global growth outlook encouraged investment in riskier assets.
A strong dollar typically makes gold more expensive for
holders of other currencies, while higher bond yields reduce the
appeal of non-yielding gold.
"The factors that pushed gold towards $1,360 in early
September are now reversing," Julius Baer analyst Carsten Menke
said.
Menke said he expected a strengthening dollar and
normalization of speculative positioning to push gold to $1,200
an ounce by the end of the year.
Prices had also been supported by purchases of physical gold
by bullion-backed exchange-traded funds. But ETF holdings
tracked by Reuters dropped between Friday and Monday by the most
since late July.
Silver was up 0.4 percent at $16.60 an ounce but
still near its lowest since Aug. 9.
Platinum was up 0.2 percent at $912.40 per ounce,
after dipping to $902.40, the lowest since July 14.
Palladium was up 0.8 percent at $916.60 per ounce,
after hitting a two-week low at $904.00. It earlier slipped
below platinum after reaching price parity for the first time in
16 years last week.
(Additional reporting by Apeksha Nair in Bengaluru. Editing by
David Evans, Greg Mahlich and Steve Orlofsky)