Gold eases, but holds above $1,200 as caution prevails

SINGAPORE (Reuters) - Gold eased for a second straight session on Monday as the dollar edged higher, but the metal remained underpinned above $1,200 an ounce as caution in financial markets prompted investors to channel money into bullion.

FUNDAMENTALS

Spot gold had fallen 0.3 percent to $1,223.70 an ounce by 0035 GMT, after declining 0.3 percent on Friday.

The metal jumped to its highest in a year earlier this month on turmoil in the stock markets and concerns over the global economy, but posted small losses last week on profit taking and as equities consolidated.

Bullion was hurt early on Monday by the strength in the dollar, which rose against a basket of major currencies as sterling slid on growing concerns that Britain would quit the European Union.

Gold, however, remains one of the best performing asset of the year with gains of 15 percent as global uncertainties linger.

Asian share markets got off to a cautious start on Monday as investors await a rush of February industry surveys to take the pulse of the global economy.

A busy week for data culminates with a Group of 20 meeting that offer leaders a chance to soothe market concerns with talk of coordination, even if it produces nothing concrete.

Data on Friday showed that rising rents and healthcare costs lifted underlying U.S. consumer price inflation in January by the most in nearly 4-1/2 years, providing support for the view that the Federal Reserve could gradually raise interest rates this year as forecast.

Investor optimism in gold was evident in flows.

SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings rose 2.71 percent to 732.96 tonnes on Friday, the biggest single day inflow since August 2011.

Hedge funds and money managers hiked their bullish bet in COMEX gold futures and options to a near four-month high in the week to Feb. 16, U.S. Commodity Futures Trading Commission data showed on Friday.

Equity funds posted their longest run of outflows since 2008 in the last week, edging closer to "capitulation" levels as risk-off redemptions accelerated, Bank of America Merrill Lynch said on Friday, adding that investors shovelled $3.2 billion into gold, the biggest two-week gold inflow since May 2010.

(Reporting by A. Ananthalakshmi; Editing by Joseph Radford)