Gold steadies off five-month high as dollar picks up

By Jan Harvey

LONDON (Reuters) - Gold steadied on Monday after dropping back sharply from the previous session's five-months highs, with a firmer dollar counterbalancing concerns over geopolitical tensions in North Korea and the Middle East.

Spot gold stood at $1,253.30 an ounce at 0945 GMT, little changed from late on Friday, while U.S. gold futures for June delivery were down $2.50 at $1,254.80.

The metal rose above $1,270 on Friday for the first time since early November after much weaker than expected U.S. jobs data curbed expectations for near-term increases to U.S. interest rates and afte the United States launched a missile strike on a Syrian air base.

It fell back quickly in later trade, however, failing once again to beat key chart resistance at its 200-day moving average, which has broadly capped gains since October.

"We've tried several times to break above this level, and every time it is pushed back," ABN Amro analyst Georgette Boele said. "That is not a positive sign in the near term.

"If you look at the other drivers as well, like U.S. yields and signals from the Fed, it is a difficult environment to have a runaway rally in gold. I still think you have some upward pressure, but there will be battles."

The dollar started the week near three-week highs against a basket of currencies after a key Federal Reserve official reinforced the U.S. central bank's commitment to continue raising interest rates.

Expectations that the pace of U.S. rate increases will pick up this year have proved a major drag on gold. Rising U.S. rates increase the opportunity cost of holding non-yielding bullion and boost the dollar, in which it is priced.

The wider financial markets took on a more cautious tone on Monday, however, with trading volumes muted by geopolitical tensions in the Middle East and the Korean peninsula.

Top aides to U.S. President Donald Trump differed on Sunday on where U.S. policy on Syria was headed after last week's attack on a Syrian air base, while U.S. Secretary of State Rex Tillerson warned that the strikes were a warning to other nations, including North Korea.

"Geopolitical tensions are likely to be supportive and may put the brakes on what would otherwise be a retracement from the mid-March uptrend," MKS said in a note.

Among other precious metals, silver was down 0.3 percent at $17.90 an ounce, having hit its highest since Feb. 27 at $18.47 on Friday. Platinum lost 0.3 percent to $948.74, while palladium slipped by 0.4 percent to $798.10.

(Additional reporting by Nallur Sethuraman in Bengaluru; Editing by David Goodman)