By Jan Harvey
LONDON (Reuters) - Gold fell on Monday as stock markets rallied on the back of Friday's stronger than expected U.S. jobs data and the prospect of more monetary stimulus from central banks, while the dollar rose against a basket of currencies.
Simmering concerns over the prospect of Britain leaving the European Union kept gold underpinned, however, keeping prices within $20 of last week's more than two-year high.
Spot gold was down 0.7 percent at $1,357.00 an ounce at 1346 GMT, having touched its highest since March 2014 last week at $1,374.91 an ounce.
It slipped sharply in the immediate wake of Friday's non-farm payrolls data, which showed U.S. job growth surged in June, but rebounded quickly from lows.
"New highs in U.S. bonds and the stronger than expected jobs report have raised the odds of a rate hike later this year," Saxo Bank head of commodities research Ole Hansen.
"But the strong response to the weakness post non-farm payrolls on Friday was a clear signal that buyers are still lurking around, waiting for the opportunity to pick gold up cheaper."
Stocks and the dollar continued to take support from the U.S. jobs report on Monday, which saw investors price in the chance of a Federal Reserve interest rate increase before the end of the year.
A 24 percent chance of an increase by December is now being priced in, the CME FedWatch tool showed, though the overall view is still that interest rates will remain unchanged.
The S&P 500 touched a record intraday high of 2,137.43 points at the open on Monday after the strong monthly jobs report last week boosted confidence in the U.S. economy.
Gold is highly sensitive to U.S. interest rates, increases in which lift the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.
U.S. gold futures for August delivery were up 20 cents an ounce at $1,358.60 on Monday.
Data from the U.S. Commodity Futures Trading Commission (CFTC) showed on Friday that hedge funds and money managers again raised their net long positions in COMEX gold and silver contracts to record highs in the week to July 5, after the June 23 vote by Britain to leave the EU.
"In our opinion, this gives rise to correction potential in both cases if speculative financial investors were to decide to take profits," Commerzbank said in a note.
Silver was up 0.2 percent at $20.31 an ounce. Among other precious metals, platinum was up 0.1 percent at $1,097 an ounce, while palladium was up 0.9 percent at $620.70.
(Additional reporting by Nallur Sethuraman in Bengaluru; editing by Mark Heinrich and William Hardy)
