* Spot gold may break support at $1,272/oz - Technicals
* Dollar climbs to 2-1/2-week high vs yen
* Specs raise net longs in gold in week to Nov. 28
(Adds MKS trader quote, details, and updates prices) Dec 4 (Reuters) - Gold prices fell in Asian trade on Monday, as the dollar gained on expectations that the United States' economy will expand further after the Senate passed a bill to overhaul the country's tax system. The Senate narrowly approved the overhaul on Saturday, moving the Republican Party and U.S. President Donald Trump a big step closer to their goal of slashing taxes for businesses and the rich while offering everyday Americans a mixed bag of changes. The dollar rebounded to a two-week high on Monday after taking a brief hit on Friday on news that Michael Flynn, former national security adviser to Trump, pleaded guilty to lying to the U.S. Federal Bureau of Investigation about his contacts with Russia. "Bullion is likely to be sensitive to dollar flows, tracking headlines generated by the FBI probe and any further tax reform related news as we head toward U.S. Nonfarm Payrolls at the end of the week," MKS PAMP trader Sam Laughlin said in a note.
Spot gold was down 0.6 percent at $1,272.91 an ounce,
as of 0735 GMT, after touching a high of $1289.50 on Friday.
U.S. gold futures were down 0.5 percent at $1,275.80
an ounce. "I think people will be disappointed that gold had that race up to $1290 area on Friday and we're sitting at $1275...any kind of rally gold has just seems to be unsustainable for the short-term" said a Hong Kong-based gold trader. "Whatever is happening to the dollar and the yield curve, you've got to be watching that," the trader said. Two Federal Reserve policymakers urged caution in raising interest rates on Friday, saying that the flattening of the yield curve was a signal that the central bank should proceed slowly. The U.S. central bank is widely expected to raise benchmark interest rates for the third time this year at its meeting next week. Higher rates tend to boost the dollar, making the greenback-denominated gold more expensive for buyers using other currencies. Meanwhile, investors also kept a keen eye on developments surrounding North Korea, with South Korea and the U.S. launching their largest-ever joint aerial drills on Monday, days after the North tested its most advanced intercontinental ballistic missile. Reuters technicals analyst Wang Tao said spot gold may break a support at $1,272 per ounce and fall more towards the next support at $1,263.35. Speculators raised their net-long positions in COMEX gold in the week to Nov. 28, U.S. data showed on Friday.
In other precious metals, silver slipped 0.7 percent
to $16.32 an ounce.
Platinum was 0.4 percent lower at $933.50 an ounce, while palladium was little changed at $1,019.40.
(Reporting by Apeksha Nair in Bengaluru; Editing by Christian Schmollinger and Sherry Jacob-Phillips)