I am looking for a matrix $C$ so that the sequence $tr(C^n)$ is dense in the set of real numbers. Equivalently (in the $2 \times 2$ case), find a complex number $z$ so that the sequence $z^n+w^n$ is dense in $\mathbb{R}$ where $w$ is the conjugate of $z$.

The answer is yes, even in the $2 \times 2$ case. Let $q_1,q_2,\ldots$ be an enumeration of the rational numbers. Let $Q_j$ be the closed interval $[q_j1/j,q_j+1/j]$. Let $I_0=[0,2\pi]$. Let $z=2e^{i \theta}$ for a $\theta \in I_0$ to be determined. By induction, we construct positive integers $n_1 < n_2 < \ldots$ and closed intervals $I_0 \supseteq I_1 \supseteq \cdots$ such that for each $j$, the trace $z^{n_j} + \bar{z}^{n_j}$ is in $Q_j$ whenever $\theta \in I_j$. Namely, if $n_1,\ldots,n_{j1},I_1,\ldots,I_{j1}$ have been determined already, then for any sufficiently large $n_j$, the set of $\theta$ such that $z^{n_j} + \bar{z}^{n_j}$ is in $Q_j$ is a union of closed intervals such that every real number is within $2\pi/n_j$ of a point inside this union and within $2\pi/n_j$ of a point outside this union, so if $n_j$ is chosen large enough, one such interval in this union will be completely contained in $I_{j1}$ and we name it $I_j$. The intersection of a descending chain of closed intervals is nonempty, so we can choose $\theta$ such that $\theta \in I_j$ for all $j$. Then $\lbrace z^n+\bar{z}^n : n \ge 1 \rbrace$ contains an element of $Q_j$ for each $j$, so it is dense in $\mathbb{R}$. 


In answer to the question as to whether $\text{tr}(C^n)$ is dense in $(2,2)$: Choose $z=\exp(2 \pi i \theta)$ where $\theta$ is irrational, and let $C$ be the diagonal matrix with $z$ and $\overline{z}$ on the diagonal. By Weyl's criterion , the fractional parts of $n \theta$ are equidistributed modulo 1, and thus $\{z^n\}$ is dense in the unit circle. From this it follows easily that $\text{Re}(z^n)$ is dense in $(1,1)$. 


Bjorn has already answered this question in the affirmative, and shown that such matrices do exist. I'd like to add a further comment here though  'almost no' matrices satisfy the required property. That is, the collection of 2x2 matrices such that Tr(C^n) is dense in R has zero Lebesgue measure. We know that Tr(C^n) = a^n + b^n where a,b are the roots of the characteristic polynomial of C. If a and b are both real then it is not possible for C to have the required property. The only possibility is where they are complex conjugates, a = r exp(iθ), b = r exp(iθ) for r >1. Then, Tr(C^{n})=2rcos(nθ). Suppose that θ is uniformly distributed over [π,π], so that exp(inθ) is uniformly distributed on the unit circle for each n. For any positive K, Tr(C^n)<K is equivalent to cos(nθ)<r^{n}K/2. The set of values of exp(inθ) for which this holds forms a pair of arcs of length r^{ n}K (to leading order). So, $$\mathbb{P}(\vert{\rm Tr}(C^n)\vert\lt K)\approx r^{n}K/\pi$$ to leading order. Summing over n, this is finite. Then, the BorelCantelli lemma says that, with probability one, Tr(C^{n})<K only finitely often. So, with probability 1, Tr(C^{n}) diverges to infinity. 


(Oops, the rescaling part is bogus in the below. So this only works for C with determinant 1.) In the 2by2 case, the answer is no. (Something like this argument should go through in general). After rescaling, we can assume the matrix has determinant 1. If C is elliptic (real trace between 2 and 2), then all powers are elliptic, so that's no good. If it's parabolic (trace equal to 2 or 2), then all powers all parabolic, again no good. If it's loxodromic, the traces of the powers have real part going to infinity with n, and so they can't be dense. 

