PRECIOUS-Gold falls 1% after hitting two-week high but stays above $1,550

(Updates prices)

* Risk assets dragged lower by Chinese virus anxiety

* Palladium off record high

By Harshith Aranya

Jan 21 (Reuters) – Gold shed 1% on Tuesday in volatile trade as investors booked profits after prices hit a two-week high early in the session, although losses were limited by a slide in equities due to worries about a virus outbreak in China.

The precious metal pared losses and climbed back up above the $1,550 level, buoyed by a low interest-rate environment and lingering geopolitical tensions.

Spot gold was down 0.2% at $1,558.60 per ounce by 1:40 p.m. EST (1840 GMT), after hitting its highest level since Jan. 8 at $1,568.35 in early trading.

U.S. gold futures settled 0.2% lower at $1,557.90.

“We’ve had a fairly decent period of performance for gold and we’re giving back some of that,” said Bart Melek, head of commodity strategies at TD Securities, adding gold is likely to hold in a fairly tight range around the $1,550 level for the time being.

“I’ve not heard of any news that would suggest that this (gold’s decline) is some sort of a structural, permanent fundamental set of developments. This is more of an adjustment towards the downside due to technical reasons.”

Safe-haven bullion drew some support as global stock markets slid on mounting concern about a new strain of coronavirus in China.

Bullion is up more than 6% since Dec. 6. On Jan. 8, gold pierced the $1,600 ceiling for the first time in nearly seven years on escalating tensions between the United States and Iran.

“The bullish structure in gold has not changed yet. It has to break below $1,450 to change that trend,” said Michael Matousek, head trader at U.S. Global Investors, adding gold will be supported by the U.S. Federal Reserve keeping interest rates steady and increased buying by central banks.

Focus is now likely to turn to the Fed as it meets for its first policy meeting of the year on Jan. 28-29. Higher interest rates lift the opportunity cost of holding non-yielding bullion.

Elsewhere, palladium fell 4% to $2,400.12, set to mark its biggest daily percentage decline in a month. Prices had scaled a fresh record peak of $2,582.19 on Monday.

“Palladium is taking a bit of a pause here as risk appetite dries up,” TD Securities’ Melek said.

Silver fell 1.3% to $17.83, while platinum dropped 1.1% to $1,004.17 per ounce. (Reporting by Harshith Aranya and Diptendu Lahiri in Bengaluru; Editing by David Gregorio and Matthew Lewis)

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