By Vijaykumar Vedala
(Reuters) - Gold prices dipped early on Monday on a stronger U.S. dollar, but remained close to a one-month high hit in the previous session on uncertainty over progress on a potential overhaul of the U.S. tax code.
Spot gold had edged down 0.2 percent to $1,291.71 per ounce by 0417 GMT. On Friday, gold jumped about 1.3 percent to nark a one-month peak of $1,297.
U.S. gold futures for December delivery dropped 0.3 percent to $1,292.30.
"Friday's move higher has definitely improved gold's chart patterns, but it remains to be seen if this will be enough to attract fresh fund buying," INTL FCStone analyst Edward Meir said in a note.
"Much of this will depend on the progress (or lack thereof) that the U.S. tax bill makes in the Senate. If efforts to pass it flounder, we could see a much sharper correction set in over U.S. equities, prompting another leg higher in gold."
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"The apparent difficulty in getting tax cuts approved in the U.S. Senate has seen investors return to safe-haven assets," ANZ said.
Spot gold may retest resistance at $1,298 per ounce, a break above which could lead to a gain to the next resistance level at $1,309, according to Reuters technical analyst Wang Tao.
"I think gold could easily push higher towards and potentially above $1,300 an ounce," said Jordan Eliseo, chief economist at gold trader ABC Bullion.
"A little bit of momentum is creeping in this market, so that shouldn't be a surprise. Meanwhile, a little bit of volatility is creeping up in other financial markets."
The dollar index, which tracks the U.S. currency against a basket of six major rivals, gained 0.3 percent.
The euro hit a two-month low against the yen on Monday, as German Chancellor Angela Merkel's efforts to form a three-way coalition government failed, raising concerns over political uncertainty in the euro zone's largest economy.
Hedge funds and money managers raised their net long positions in COMEX gold and silver contracts in the week to Nov. 14, data showed on Friday.
Meanwhile, silver fell 0.8 percent to $17.17 after hitting a one-month high of $17.373 in the previous session, while platinum drifted away from Friday's near-two month peak of $954.30 and was down 1.1 percent at $939.99.
Palladium rose 0.2 percent to $994.85 an ounce.
(Reporting by Vijaykumar Vedala in Bengaluru; Editing by Richard Pullin and Joseph Radford)