Gold slips as U.S. dollar claws back some ground

By Jan Harvey

LONDON (Reuters) - Gold fell on Monday as a revival in the dollar prompted some buyers to cash in gains in the metal after its sixth weekly price increase in seven weeks.

Gold has risen more than 3 percent so far this month, and after a strong end to December touched its highest since August 2016 last week at $1,366.07 an ounce.

Its strength has been driven largely by a slide in the dollar index to three-year lows. A rise in the currency on Monday after six straight weeks of losses prompted gold's pullback.

Spot gold was down 0.5 percent at $1,343.32 an ounce at 1445 GMT, while U.S. gold futures for February delivery were down $10.10 an ounce at $1,342.00.

"The market seems to be running out of steam at the moment, running long and going nowhere, so (we're) seeing some stale liquidation," David Govett, head of precious metals at Marex Spectron said. "Overall what the dollar does, gold will do the opposite."

The dollar climbed against a currency basket on Monday as rising bond yields helped underpin the greenback ahead of a week packed with U.S. data. It remains on track for its biggest monthly decline since March 2016, however.

The currency came under pressure last week after Treasury Secretary Steven Mnuchin indicated he was broadly supportive of a weak dollar, though U.S. President Donald Trump later said he wanted to see strength in the currency.

Higher bond yields can also weigh on gold, as they increase the opportunity cost of holding non-yielding bullion. U.S. Treasury yields hit multi-year highs on expectations central banks would reduce stimulus as economies improve.

Gold traders are now awaiting the outcome of a Federal Reserve policy meeting this week, as well as U.S. jobs data, a key indicator of the strength of the broader economy. Both will be watched for their implications for U.S. interest rates.

Demand for physical metal was weak in the key Chinese market overnight in the face of the firmer dollar, MKS said in a note, although the onshore premium over spot in Shanghai remained robust at $8 an ounce.

Among other precious metals, silver was down 1.1 percent at $17.20 an ounce. It rose 2.3 percent last week, the biggest rise of any of the major precious metals.

Platinum, this year's best performing precious metal so far, was up 0.1 percent at $1,010.50, after easing 0.3 percent last week in its first weekly decline in seven.

Palladium was 0.7 percent lower at $1,084.60 an ounce.

(Additional reporting by Nithin Prasad in Bengaluru; Editing by Alison Williams and Louise Heavens)