Gold jumps above $1,200 on chart-based buying surge

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Gold jumped more than 1 percent on Monday on a brief surge of late-day technical buying as it breached the $1,200-per-ounce level long after the U.S. dollar dropped from a more than five-year high.

Spot gold was up 1 percent at $1,203.51 an ounce after briefly rising to $1,208.19. The metal lost 1.1 percent on Friday when U.S. data showed employers added the largest number of workers in nearly three years in November and that wages picked up.

U.S. gold futures for February delivery rose 0.4 percent to settle at $1,194.90 an ounce.

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"This is all technical buying ... $1,200 is the line in the sand right now," said Eli Tesfaye, senior market strategist for RJO Futures in Chicago.

"Every time the market gets close to $1,200, you get a little bit of buying interest."

The U.S. dollar traded close to its highest since March 2009 on the back of the strong jobs report but turned lower later in the session.

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European shares fell as data showed China's imports dropped and Japan's economy shrank more than initially reported in the third quarter on declines in business investment.

In terms of the gold market, "it's getting tricky to see what is going to really push it firmly into a new range at the moment unless we see some major macroeconomic shifts," Macquarie analyst Matthew Turner said.

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"But the largest now seems to have run its course - everyone expects the Fed to raise rates at some point, and very few people now think that anything different is going to happen."

The strength in the economy could draw the U.S. Federal Reserve closer to raising interest rates, lifting the dollar and in turn depressing demand for gold.

Hedge funds and money managers pushed a bullish position in U.S. gold contracts to the highest level since August in the week to Dec. 2, data shows.

Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.12 percent to 720.91 tonnes on Friday, though still close to a six-year low.