* U.S. Senate approves tax bill
* Dollar falls to two-week low
* U.S. bond yields highest in nine months
* Gold to slip to $1,200/oz in mid-2018 -Goldman Sachs
* Palladium hovers around last week's near 17-year high (Recasts; updates prices; adds byline, NEW YORK dateline)
By Marcy Nicholson and Peter Hobson
NEW YORK/LONDON, Dec 20 (Reuters) - Gold prices rose on Wednesday for a fourth straight session to reach a two-week high as U.S. data showing solid home sales but a fall in mortgage applications pushed the dollar to a two-week low.
Gains in bullion were limited, however, by a rise in U.S. bond yields to nine-month highs after the Congress passed the country's biggest tax overhaul in decades. US/
A weaker dollar makes gold cheaper for holders of other currencies, which can stimulate demand, but higher Treasury yields reduce the appeal of non-yielding bullion.
Spot gold XAU= was up 0.3 percent at $1,265.26 an ounce by 1:53 p.m. EST (1853 GMT), after rising to $1,267.81, the highest since Dec. 6.
U.S. gold futures GCcv1 settled up 0.4 percent at $1,269.60.
Gold has risen by around 2.5 percent from a five-month low of $1,235.92 on Dec. 12, helped by a weakening dollar. .DXY FRX/
"The price of gold continues to be rangebound between $1,250 and $1,270 as we approach the holiday week," said Walter Pehowich, executive vice president of investment services at Dillon Gage Metals. "Many on Wall Street seem to have flattened out their books and are getting ready for the new year after the Christmas break." are on track to register their narrowest trading range in the last quarter of 2017 than any quarter in a decade.
"Gold is coming up from a cyclical bottom. It's going to get quieter due to the upcoming holiday-long weekends," said Mun Chun Loh, director, Private Wealth at GoldSilver Central Pte Ltd in Singapore.
Holdings of the world's largest gold-backed exchange-traded fund, New York-based SPDR Gold Shares GLD , fell 1 percent over Monday and Tuesday to the lowest level since early September. HLDSPDRGT=XAU
But low prices have spurred demand for physical gold in China, with local premiums approaching $11, said MKS PAMP trader Sam Laughlin.
Goldman Sachs (NYSE:GS) said in a research note it expected gold prices to fall further, reaching $1,200 an ounce by mid-2018.
"We see the decline in gold as evidence that 'fear' effects, which had been keeping gold supported, have at least partially moderated as U.S. tax reform and the transition to a new (U.S. Federal Reserve) chair appear to be going smoothly," it said.
On the technical side, resistance was at the 200-day moving average at $1,269.15 an ounce and momentum indicators suggested gold would extend its recent rise if it remained above a Fibonacci level of $1,260.50, said analysts at ScotiaMocatta.
Among other precious metal prices, palladium XPD= gained 0.5 percent to $1,026.97, not far from last week's peak of $1,038, the highest since February 2001.
Spot silver XAG= was up 0.3 percent at $16.17 an ounce, while platinum XPT= was 0.2 percent higher at $915.74 an ounce, after both rose to 2-1/2-week highs.