Gold halts 3-day drop as dollar and equities tumble

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Gold rose after a three-day losing streak on Monday as the dollar and stock markets fell, though prices stayed near 11-week lows after Friday's strong U.S. jobs report fueled speculation interest rates may rise in September.

U.S. gold futures for August delivery settled $5.50 higher, at $1,173.60 an ounce, while spot gold rose about 0.3 percent to $1,174 an ounce.

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The metal touched its lowest since March 19 at $1,162.35 on Friday after data showed U.S. job growth accelerated more than expected last month.

The jobs report bolstered expectations the Federal Reserve will begin to raise rates in September, which would increase the opportunity cost of non-interest-paying bullion.

"There is still potential for gold prices to continue dropping, but it will be dependent on how positive the U.S. data is," Natixis analyst Bernard Dahdah said.

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"Gold is not a yield-earning investment, and we know that it costs you money to hold it in large quantities," he said. "All these incentives of yield-earning investments are really taking their toll on gold."

Analysts see the next major support level for gold around the March low of $1,142.

A retreat in stocks helped underpin gold prices as equity market strength has diverted some interest from bullion. Sales of German government bonds weighed on European equities on Monday.

Investor positioning in gold continued to reflect bearish sentiment.

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Further outflows were seen from the world's top gold-backed exchange-traded fund SPDR Gold Trust. Holdings fell 0.17 percent to the lowest since mid-January at 708.70 tons on Friday.

Hedge funds and money managers cut net long positions in gold and silver in the week ended June 2, U.S. Commodity Futures Trading Commission data showed on Friday.

In mining news, South Africa's Association of Mineworkers and Construction Union said on Sunday it would launch a wildcat strike if its rival union and gold mining companies impose a wage deal on its members.

Interest in physical gold in the major Asian markets picked up on Monday after bullion prices declined for a third straight week, by 1.6 percent.

"We did notice solid Chinese interest during their morning session as the onshore premium moved to around $3.50," MKS said in a note. "Friday's low should provide broad short-term support for the yellow metal, while $1,180 will be met with some resistance."