By Pratima Desai
LONDON (Reuters) - Gold prices held firm near one-month highs on Tuesday, supported by political and economic uncertainty in the United States and expectations of a lower dollar.
Spot gold was up 0.2 percent at $1,256.6 an ounce at 1345 GMT, having touched its highest in a month at $1,261.03 on Monday. U.S. gold futures rose 0.1 percent to $1,256.6.
Traders report more investor buying interest after U.S. President Donald Trump failed to push through healthcare reform last week, fuelling concern about his ability to implement his economic policies.
That worry also sent the dollar to a four-and-a-half-month low against a basket of currencies on Monday. This makes dollar-denominated gold cheaper for holders of other currencies, potentially boosting demand.
"The dollar has come under a lot of pressure and lifted gold," said Julius Baer analyst Carsten Menke. "Changing perceptions of the outlook for U.S. interest rates will create volatility in gold."
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The U.S. Federal Reserve raised interest rates this month, boosting the dollar, which could strengthen further on expectations of further rises after comments from its policymakers.
However, some analysts expect to the Fed to keep rates on hold for some time, leaving the dollar to drift lower.
"Dollar weakness is something that could propel prices higher, especially in light of the latest CFTC report that shows dollar longs building for a third week in a row despite ongoing weakness," INTL FCStone analyst Edward Meir said in a note.
Investor demand for gold can be seen in the world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares, which reported an inflow of 2.7 tonnes on Monday.
Traders see technical resistance around $1,260, near the 200-day moving average, while support is expected to kick in at a Fibonacci retracement level of about $1,245.
In other metals, spot silver gained 0.3 percent to $18.12 an ounce and platinum slid 0.1 percent to $962.7.
Palladium ceded by 0.6 percent to $788.5 an ounce. The industrial metal used in autocatalysts hit $815.40 last week, its highest since March last year, on expected growing demand from carmakers.
Analysts, however, are not convinced the fundamentals justify current price levels.
"U.S. car sales are moving sideways, inventories are rising and dealers are upping incentives," Menke said.
"China's car sales numbers for March will be crucial; profit-taking will be triggered if weakness is confirmed. European sales are solid, but slowing from last year."
(Additional reporting by Arpan Varghese in Bengaluru; Editing by Keith Weir)