* U.S. House passes its version of tax cut bill
* Upbeat U.S. data raise prospect of Fed rate increase
* Palladium rises for first session in six (New throughout, updates prices, market activity and comments; adds second byline, NEW YORK dateline)
By Renita D. Young and Zandi Shabalala
NEW YORK/LONDON, Nov 16 (Reuters) - Gold prices were slightly lower on Thursday, trading in a tight range as the U.S. House of Representatives passed its version of sweeping tax cuts and investors weighed possible changes in fiscal policy against the impact of an expected rise in U.S. interest rates.
The House passed a bill to cut federal tax rates on corporations, small businesses and individuals. The U.S. Senate has yet to vote on its version the bill. will determine the type of country we have and it has an effect on the dollar, which will in turn have an effect on gold," said John Lawrence, senior metals trader for Heraeus Precious Metals in New York.
Spot gold XAU= was down 0.1 percent at $1,277.80 an ounce by 2:09 p.m. EST (1909 GMT). On Wednesday, it touched a 3-1/2 week high of $1,289.09.
U.S. gold futures GCcv1 for December delivery settled up 50 cents, or 0.04 percent, at $1,278.20 per ounce.
So far in November, gold has traded in a tight range spanning about $24.
ICBC Standard Bank precious metals strategist Tom Kendall said the reason for rangebound trade was pressure from the prospect of a rise in U.S. interest rates dueling with support from uncertainty about U.S. fiscal policy.
"The two are kind of pushing and pulling on global yields and on the gold price," he said.
The dollar rose slightly. FRX/ A stronger U.S. dollar .DXY makes gold more expensive to buyers using other currencies. Higher interest rates increase the opportunity cost of holding non-yielding gold.
Traders see a 96.7 percent chance of the U.S Federal Reserve raising rates at its Dec. 13 meeting, CME Group's FedWatch showed. It would be the Fed's third rate increase this year.
On Wednesday, the U.S. government said underlying consumer prices increased in October. This strengthened the view that the Fed no longer needed to worry about a recent disinflationary trend. on Wednesday, veteran Fed policymaker Eric Rosengren said falling unemployment and sustained growth meant the economy had accelerated beyond a sustainable level, so the Fed should continue raising rates. physical demand, a note by BMI Research said China's gold production growth is expected to slow over the years to 2026 because of depleting reserves and rising production costs.
In other precious metals, palladium XPD= broke a five-session losing streak, rising 0.4 percent at $987.50 an ounce after touching a two-week low on Wednesday.
Silver XAG= up 0.4 percent at $17.06 an ounce and platinum XPT= up 0.1 percent at $932 an ounce.