Gold off 2-month high ahead of U.S. elections

SINGAPORE, Nov 7 (Reuters) Gold was steady within sight of its highest level in two months on Tuesday but volatile as profit taking persisted ahead of U.S. congressional elections.

Spot gold hit a high of $625.75 an ounce but slipped to $622.30/623.30 an ounce by 0324 GMT, slightly lower than $623.70/624.70 late in New York.

Gold rallied to its highest since Sept. 7 at $629.40 on Monday on technical buying by hedge funds amid worries about the outlook for the dollar. Investors, who had made money in the equity and energy markets, also shifted back to gold, dealers said.

''In the light of very little market-moving data coming out, there's a possibility that investors will happily take profit,'' said Darren Heathcote of Investec Australia in Sydney.

''At the moment, we're stuck in a range. Certainly $630 seems like some kind of resistance. On the downside, it probably will test somewhere around $620,'' he said.

The dollar slipped to 118.20 yen , from 118.30 yen in late U.S. trade, on profit taking. It had gained in New York after Friday's U.S. jobs report reinforced the view the Federal Reserve was unlikely to cut interest rates soon.

The euro was nearly flat at $1.2725 .

''If the Republicans are defeated by the Democrats, the dollar and the stock markets will decrease sharply. But gold may rise further,'' said Yukuji Sonoda, precious metals analyst at Daiichi Commodities in Tokyo.

''Everything depends on the American election,'' said Sonoda, who pegged the upside target at $650 an ounce.

Some dealers said the dollar could come under selling pressure if the Democrats take over the Senate, as the administration of President George W. Bush could face difficulties in managing economic and other policies.

Latest polls suggest that Bush's Republican Party will likely lose control of the House of Representatives but might have just enough support to hold on to the Senate.

A weaker dollar makes dollar-priced gold cheaper for holders of other currencies.

The benchmark contract on the Tokyo Commodity Exchange , October 2007, fell 23 yen per gram to 2,388 yen per gram, reflecting declines in New York's COMEX market.

Platinum dropped to $1,167/1,174 an ounce from $1,190/1,195 late in New York, shrugging off gains in Tokyo futures.

Spot platinum spiked to its highest since Sept. 11 at $1,213 last week on rumours of a launch of a platinum exchange-traded fund.

Most active TOCOM platinum futures , currently October 2007, jumped by the daily 150 yen limit to 4,346 yen a gram -- the highest for a key contract since Sept. 19 -- before slipping on profit taking.

''It's natural to see corrective sales after seeing it rise 250 yen in the last two days,'' said Takasahi Ogura, a manager at Kanetsu Asset Management.

''Speculation over the possible launch of a platinum ETF has faded and that prompted profit-taking, but I think platinum will be supported as such speculation will stay,'' he said.

Palladium fell to $327/332 an ounce from $331/336.

Silver edged down to $12.55/12.62 an ounce from $12.65/12.72 late in New York. It had risen to a two-month high of $12.74 on Monday.

REUTERS SBA DS1617