* Stocks, dollar wilt as U.S. tax bill moves forward
* Gold seeing strong reversal from 200-week moving average
* GRAPHIC-2017 asset returns: http://tmsnrt.rs/2jvdmXl
(Updates throughout, adds LONDON dateline) LONDON, Dec 21 (Reuters) - Gold steadied near a two-week high on Thursday, supported by weakness in stocks and a retreat in the dollar versus the euro as markets awaited the signing of a new U.S. tax bill. News that the Bank of Japan had left its expansionary monetary policy unchanged supported the U.S. currency versus the yen, however, holding the dollar index in a narrow range. Gold, which is priced in dollars, is highly sensitive to moves in its exchange rate.
Spot gold was at $1,265.45 an ounce as of 1025 GMT,
little changed from late on Wednesday, after hitting its highest
since Dec. 6 at $1,268.26. U.S. gold futures were
broadly flat at $1,269.20 an ounce. "We've seen a 'sell the fact' fall-back in the dollar and equities since the passing of the tax reform legislation, which has helped give some support to gold," Mitsubishi analyst Jonathan Butler said. "But gold has failed to break out above $1,270, suggesting market participants may be cautious about taking big positions as we approach the year-end." "The crucial test will come if the rally in U.S. Treasury yields continues as investors anticipate more interest rate rises next year," it said. "If it does this could put pressure on gold as a non-yielding asset." World markets offered a muted reception on Thursday to the passage of U.S. tax cuts as potential benefits to company bottom lines were already priced in. The dollar eased 0.1 percent against the euro, meanwhile. U.S. Treasury yields hit their highest in nine months on Wednesday on optimism the U.S. tax overhaul would help boost growth and as economic data improves. Rising bond yields tend to lift the dollar and depress the appeal of non-yielding bullion. From a technical perspective, gold is seeing a strong recovery from its 200-week moving average at $1,232, Commerzbank said in a weekly note. It neared that level earlier this month after the Federal Reserve lifted interest rates. "The rally has reached the 23.6 percent retracement at $1,265 and this is looking exposed," it said. "Above here will allow for a move to the $1,282 three-month resistance line, with a close above here necessary to restore upside pressure, (which is) favored."
Among other precious metals, silver was down 0.2
percent at $16.14 an ounce, having climbed to a two-week peak of $16.26 in the previous session.
Platinum was 0.6 percent lower at $913 an ounce,
after reaching its highest since Dec. 5 in the previous session.
Palladium was up 0.7 percent to $1,032.15.
(Additional reporting by Apeksha Nair in Bengaluru; editing by Jason Neely)