* Gold gives back earlier gains
* Market weighs new Trump policy (Updates throughout, fresh quote)
By Zandi Shabalala
LONDON, Nov 10 (Reuters) - Gold fell 1 percent on Thursday after the dollar rose to a 3-1/2 month high against the yen, as markets weighed the election of Donald Trump as U.S. president and how his policies could affect economic growth. FRX/
Trump's plans call for infrastructure building and massive tax cuts which could increase the U.S. budget deficit and help support gold. His victory has also called into question the expected U.S. interest rate increase in December. the Republican president-elect has also vowed to boost growth in the U.S. economy which could boost the dollar and in turn hurt gold, which is priced in the U.S. currency.
Spot gold XAU= was down 0.85 at $1,266.99 per ounce at 1611 GMT, after touching $1,262.96, its lowest since Oct 28. U.S. gold futures GCcv1 fell 0.5 percent to $1,267.00 per ounce.
"In general markets are cheering, they are buying into story that President Trump will boost fiscal spending and will get growth up," Danske Bank senior analyst Jens Pedersen said.
Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion and is seen as a safe-haven in times of uncertainty.
Trump has also pledged to tear up or renegotiate international trade deals, which could unleash a wave of protectionism and stall a tentative global economic recovery.
On Wednesday, news of Trump's win initially led investors to flee stocks and emerging market currencies in favour of assets such as gold and sovereign bonds.
But early gains were later given back as U.S. markets reacted positively to the Trump win and there was a rally in most assets on Thursday.
Gold rose nearly 5 percent to touch $1,337.40 on Wednesday, its highest in six weeks, before closing up just 0.2 percent.
Goldman Sachs (NYSE:GS) analysts said in a note that while higher uncertainty warranted an allocation to gold from a portfolio construction perspective, "the tactical outlook remains mixed".
Gold is expected to fall to $1,249 per ounce, based on its wave pattern and a Fibonacci retracement analysis, according to Reuters technical analyst Wang Tao. XAG= was up 0.4 percent at $18.54 an ounce.
Platinum XPT= fell 2.4 percent to $975 while palladium XPD= rose 2.2 percent to $693.