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PRECIOUS-Gold reverses course, falls from 2016 high as dollar rebounds

* Dollar reverses after Trump comments

* Gold drops more than 1 percent

(New throughout, updates prices and market activity and comments) NEW YORK/LONDON, Jan 25 (Reuters) - Gold dropped more than 1 percent on Thursday, retreating after an early rise as the U.S. dollar strengthened when President Donald Trump talked up a stronger greenback. The dollar reversed earlier losses and U.S. stocks relinquished gains after Trump told CNBC in an interview in Davos, Switzerland that he wants to see a strong dollar.

That sent gold tumbling to a session low of $1342.70 per ounce. A day earlier, the dollar fell and gold rose after U.S. Treasury Secretary Steven Mnuchin said he welcomed a weaker currency. "The second Trump's comments came out, we saw weakness in the euro and strength in the dollar that bled over into other markets," said Phillip Streible, senior commodities strategist at RJO Futures in Chicago. "Gold started to sell off and silver followed. Once that occurred, it seems like people long on this rally that had built up a lot of positions at these higher levels were nervous that they'd give up their gains that they've seen over the last few weeks."

Spot gold was down 0.8 percent at $1,347.39 by 4:21

p.m. EST (2121 GMT). Its session high of $1,366.07 was the highest since Aug. 3, 2016. On Wednesday it jumped 1.3 percent in the biggest daily gain since August.

Earlier, U.S. gold futures for February had settled

up $6.60, or 0.5 percent, at $1,362.90 per ounce.

The euro was flat, retreating from an early jump to

its highest in three years on a boost from comments by European Central Bank chief Mario Draghi.

"After everybody heard the purveyors of finance, their views on the dollar and global GDP, there was an intraday reversal," said Michael Matousek, head trader at U.S. Global Investors in San Antonio. After reaching its highest since August 2016 this week, gold was due for a correction, traders said. "The explosive move we have seen almost continuously since Dec. 12 is really quite amazing. For this market to have a chance of going higher it desperately needs to consolidate," Saxo Bank analyst Ole Hansen had said earlier.

In other precious metals, silver dropped 1.5 percent

at $17.30 an ounce after touching $17.70, its highest since Sept. 15.

Platinum was down 0.2 percent at $1,010.50 an ounce

after hitting its highest since February 2017 at $1,027.60.

Palladium fell by 1.5 percent at $1,094.35 an ounce.

(Additional reporting by Nallur Sethuraman in Bengaluru; Editing by David Gregorio)