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Gold firms as dollar retreats from near 9-month high

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Stockbyte

Gold rose on Monday as the dollar retreated from an earlier near nine-month high, though uncertainty over the timing of a U.S. interest rate hike kept prices hemmed in a range.

Signs of improving physical demand in major Asian consumers helped underpin the metal after it snapped three weeks of losses last week to rise 1.3 percent, analysts said.

Spot gold was down 0.2 percent at $1,264.20 an ounce, while U.S. gold futures for December delivery settled down to $1263.70 an ounce.

"The weaker U.S. dollar certainly contributes to the price strength," Commerzbank analyst Carsten Fritsch said. "The gold price already showed relative strength recently. It did not fall despite a stronger dollar and news of massive ETF outflows on Friday."

The U.S. currency retreated on Monday, after rallying against a currency basket in early trade on expectations the Fed will raise interest rates this year, and a receding chance of Donald Trump becoming U.S. president.

Gold is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.

Third-quarter growth figures from the United States and Fed policymakers' speeches due this week will be closely watched for clues on a possible interest rate hike.

Investment interest in gold showed signs of softening last week. U.S. Commodity Futures Trading Commission data showed on Friday hedge funds and money managers cut their net long positions in COMEX gold for a third week in the week to Oct. 18.

The world's largest gold-backed exchange-traded fund, SPDR Gold Shares, reported its biggest one-day outflow since April 2013 on Friday, of 16.6 tonnes. "Over the last three weeks we've had very much a rang bound environment," Mitsubishi analyst Jonathan Butler said. "The strength of the dollar, which is a negative factor for gold, is in large part responsible for that. On the other side, physical demand in Asia has at least given some price support."

"We have the November Fed meeting on the horizon, and the U.S. election - those are the two big macro events," Butler added. "But with a Democratic election victory, and no move on rates in November, nothing really changes for gold."

Silver was up 0.7 percent at $17.59 an ounce; platinum was 0.7 percent higher at $935.50 an ounce having in the previous session touched its lowest since Feb. 29 at $921.20.

Palladium, which hit a more than three-month low of $613.10 in the previous session, was up 0.2 percent at $625.50.