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PRECIOUS-Gold dips, investors wary about U.S. rates

* Spot gold may retest $1,300 in coming weeks- analyst

* Silver hits two-week low, palladium at one-week nadir

(Adds comments on palladium, updates prices) LONDON, Aug 7 (Reuters) - Gold prices edged lower on Monday, failing to gain support from a weaker dollar as investors digested sharp losses in the previous session and worried about further U.S. rate hikes.

Spot gold was down 0.1 percent at $1,257 per ounce at

1200 GMT, having on Friday touched its lowest in just under two weeks at $1,254 an ounce and registering its first weekly decline in four.

U.S. gold futures for December delivery fell 0.2

percent to $1,262.70 per ounce. The dollar weakened on Monday following sharp gains the previous session, as investors focused on inflation data due this week that could determine the currency's longer-term trajectory. Usually a weaker dollar supports commodities such as gold that are priced in the greenback, lowering the cost for buyers outside the United States. Many investors, however, seemed wary of the upcoming data following unexpectedly strong jobs numbers on Friday, traders said. "Investors were quick to liquidate some long positions, with market pricing of another rate hike by the Fed rising slightly as a consequence," said ANZ Research in a note. In coming weeks gold may get a boost if U.S. politicians opt for a "clean" raising of the debt ceiling, without linking it to spending or tax provisions, said analyst Tom Kendall at ICBC Standard Bank. "If the Republicans push for an easy, light version of the debt ceiling legislation, it has implications for the U.S. deficit and that will feed back into another positive story for gold," Kendall said. "But whether that is sufficiently positive to get it up through $1,300, I'm not sure. I suspect we'll need something else as well alongside it." Gold has largely been trapped in a broad range between $1,200 and $1,300 this year. Also eroding support for gold on Monday was a rise by world equities to record highs following better-than-expected company earnings and economic data from the United States. Gold is used as an alternative investment during times of political and financial uncertainty that pressure other asset classes.

In other precious metals, silver fell 0.4 percent to

$16.17 per ounce, after sinking to $16.10, a low since July 20.

Platinum rose 0.1 percent to $960.74 per ounce, after

hitting its highest since late April at $970.10 in the previous session. It gained 3.2 percent last week, its biggest weekly gain since early January.

Palladium dropped 1.1 percent to $867.22 per ounce

after touching $866, its weakest since July 27. Palladium has surged 28 percent this year due to a combination of some regional shortages and speculative flows, Kendall said. "But we haven't got to the point at which you get those panicked moves in palladium where the borrowing costs go up, the forwards start to move and everybody is chasing around for metal. We're still a long way off that point."

(Additional reporting by Nithin Prasad and Arpan Varghese in Bengaluru; Editing by David Holmes and David Evans)