* Stop-loss selling triggered as prices dropped below key level
   
* Physical gold buying interest emerges below $1,700/oz
   
* Coming up: U.S. retail sales, Nov; 1330 GMT

SINGAPORE, Dec 13  - Gold dropped about 1 percent on Thursday after the Federal Reserve linked its monetary policy to unemployment, raising concerns that future economic stimulus could be limited.
   
Gold benefits from easy monetary policy as it drives investors who fear diminishing value in fiat currencies to seek safety in hard assets such as bullion. Gold has risen nearly 9 percent so far this year.
   
The Fed said it plans to buy $45 billion in longer-term Treasuries each month on top of the $40 billion monthly purchase of mortgage-backed securities, as expected, but set unemployment and inflation thresholds for exit strategy.
   
"This announcement is a bit confusing to gold investors as it linked policy to unemployment, etc.," said a Tokyo-based trader. "Perhaps the market wanted unlimited QE."
   
Last month the U.S. unemployment rate dropped to a near four-year low of 7.7 percent, although the better number was the result of a lower number of job-seekers. 
   
Spot gold dropped 1 percent to $1,693.8 an ounce earlier in the day, before paring some losses to stand at $1,700.01 by 0433 GMT. Fed's move to buy bonds had pushed up prices to a near two-week top of $1,723.01 on Wednesday.
   
When prices dropped below the 100-day moving average above $1,705, stop-loss selling was triggered, traders said.
   
The most-active U.S. gold futures contract lost as much as 1.3 percent to $1,695.5 an ounce, and recovered to $1,701.70. Nearly 27,000 lots already changed hands, an usually high number for early Asian trading hours.
   
Physical gold buying demand is expected to pick up after prices fell below $1,700 level, traders said.
   
"Physical demand seems to be supportive, but can't offset all investor selling," said the Tokyo-based trader.
   
GOLD SEEN BOUND IN A RANGE   
But gold is likely to remain rangebound, as many investors are closing books for the year, while the difficult U.S. budget talks keep them away from big bets.
   
The negotiation could drag on past Christmas given sharp differences between congressional Republicans and the White House on how to avert steep tax hikes and budget cuts.
 
"The near term risk is a stronger dollar," said Jeremy Friesen, commodity strategist at Societe Generale in Hong Kong. "The 'fiscal cliff' is going right to the end, and that could be support the dollar and take some shine off gold."
   
The dollar, seen as an ultimate safe haven, is likely to attract investors worried about the uncertainty in the U.S. fiscal situation. A stronger greenback pressures dollar-priced commodities by making them more expensive for buyers holding other currencies.
   
In other metals, U.S. silver fell more than 2 percent to $32.88 an ounce, before paring losses to stand at $33.10. Spot silver dropped nearly 2 percent to $32.79 and stood at $33.02.
   
Spot platinum fell 0.8 percent to $1,619.07, easing from $1,643.50 hit on Wednesday, its highest since Oct. 19. Spot palladium eased to a one-week low of $679.72.
   
    Precious metals prices 0433 GMT
  Metal             Last    Change  Pct chg  YTD pct chg    Volume
  Spot Gold        1700.01  -11.54   -0.67      8.71
  Spot Silver        33.02   -0.42   -1.26     19.25
  Spot Platinum    1619.07  -13.68   -0.84     16.23
  Spot Palladium    686.00   -6.50   -0.94      5.13
  COMEX GOLD FEB3  1701.70  -16.20   -0.94      8.61        26702
  COMEX SILVER MAR3  33.10   -0.69   -2.03     18.56         8067
  Euro/Dollar       1.3084
  Dollar/Yen         83.56
  COMEX gold and silver contracts show the most active months