* Euro recovers from near 2-year low

* Speculators cut net longs in COMEX gold to lowest since Feb.

(Updates prices)

By Clara Denina

LONDON, Dec 5 (Reuters) - Gold fell more than 1 percent on Monday as European equities strengthened as investors shrugged off worries of political instability in Italy.

Italian Prime Minister Matteo Renzi said he would resign after suffering a crushing defeat on Sunday in a referendum on constitutional reform, raising concerns of early elections in 2017.

Spot gold XAU= fell by as much as 1.2 percent to a session low of $1,162.35 an ounce, within sight of a 10-month low of $1,160.38 hit last week, and was down 0.7 percent at $1,169.29 by 1302 GMT. U.S. gold futures GCcv1 shed $7.80 to $1,170.10.

Gold cut some losses as the euro recovered from an earlier near-two year low against the dollar hit after Renzi said he would resign.

But the metal remained under the pressure of stronger European shares, as investors were reassured by expectations the European Central Bank (ECB) would step in if needed. The next ECB policy meeting is on Thursday.

Higher appetite for risk curbs the appeal of assets viewed as safer, such as gold.

The precious metal fell more than 8 percent in November, hurt by a jump in the dollar and Treasury yields after Donald Trump's surprise election to the U.S. presidency led to speculation that his commitment to infrastructure spending would spur growth and inflation.

Prices had touched a two-year high in July on uncertainty about U.S. interest rate increases and as investors scoured for safe assets following Britain's vote to leave the EU.

"Investors are looking at the general appeal of the U.S. versus Europe and assessing where their money is going to give them a bigger return," said ICBC Standard Bank analyst Tom Kendall.

"Gold has done really well up until the last six months because investors weren't earning on cash above inflation but now U.S. 10-year yields are higher and real interest rates have become more positive hence gold looks less attractive because one can earn a return on cash elsewhere."

Speculators reduced their net long position in gold futures and options by 17,843 lots to 103,392 lots, the lowest since February, U.S. Commodity Futures Trading Commission data showed on Friday.

Tracking losses in gold, silver XAG= dropped 0.4 percent to $16.66 an ounce, after touching its highest in more than two weeks earlier in the session.

Platinum XPT= was up 0.1 percent at $929.30 an ounce and palladium XPD= slid 1.1 percent to $731 an ounce.

(Additional reporting by Swati Verma and Nallur Sethuraman in Bengaluru; Editing by David Evans and Adrian Croft) ((clara.denina@thomsonreuters.com)(+44 207 542 9420)(Reuters Messaging: clara.denina.thomsonreuters.com@reuters.net)(Twitter: @claradenina))