Gold settles at $1,232.80, highest since Oct. 22

Source: World Gold Council

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Gold jumped on Monday as the dollar pared gains and shares turned negative, with investor sentiment boosted by shifting expectations on when U.S. interest rates may rise.

climbed to its highest since Dec. 11 at $1,235 and was up 1 percent at $1,234 an ounce.

U.S. gold futures for delivery in February settled at at $1,232.80 an ounce, the highest since Oct. 22.

U.S. nonfarm payrolls data on Friday showed U.S. wages posted their biggest decline in at least eight years in December, even though payrolls increased by a brisk 252,000.

The data added to speculation the Federal Reserve would be cautious in raising rates, which could help non-interest-bearing gold.

"The market is dominated by this ongoing debate about whether the Fed looks at the jobs and the GDP growth or wage inflation and how their focus will impact the timing of interest rates hikes," Societe Generale analyst Robin Bhar said.

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"In the meantime there are critical events such as the ECB meeting on monetary easing next week and then the Greek political elections, which could give support to prices at least until the end of the month, due to the need for safe havens."

The dollar rose 0.4 percent against six major currencies, but stood below a nine-year peak hit last week, while European shares rose and oil prices fell to their lowest since April 2009.

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Weaker oil prices tend to hurt gold as they reduce the need for gold as a hedge against oil-led inflation. But as equity markets have recently been hit by persistent weakness in oil prices, flight-to-safety demand bolstered the metal.

Short-term investor sentiment turned slightly more positive towards gold, with holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rising 0.42 percent to 707.82 metric tons on Friday.

Hedge funds and money managers raised their net long positions in gold and silver futures and options in the week to Jan. 6, U.S. data showed on Friday.

Bullion drew some support from physical markets, with buyers in China stocking up for the Lunar New Year holiday in February.

Premiums on the Shanghai Gold Exchange were between $4 and $5 an ounce, steady from last week.

Silver was down 0.1 percent at $16.46 an ounce, while platinum was up 0.1 percent at $1,226.00 an ounce and palladium was unchanged at $800.50 an ounce.