Gold closes down despite dollar's fall

NEW YORK/LONDON (Reuters) - Gold fell on Monday as some investors took profits amid fears the precious metal's 18-month highs were overdone after it surged above $1,000 an ounce last week.

Gold fell early when the dollar gained strength against the euro, recovered some losses later, but remained moderately lower even as the dollar fell to its lowest point against the euro this year.

Spot gold fell as low as $992.90 before rebounding to trade at around $999 late in New York against Friday's comparable rate of $1,004.85.

On the COMEX division of the New York Mercantile Exchange, December gold was down $5.30 at the close at $1,001.10 an ounce. The contract seesawed around $1,000, holding above it for most of the session.

The dollar fell to its lowest level this year against the euro as a rebound in U.S. stocks revived risk appetite and reduced the greenback's safe-haven appeal.

The dollar's early strength undermined metals across the board. But when the U.S. currency turned lower, precious metals investors were reluctant to push them back above recent long-term peaks.

A stronger U.S. currency typically weighs on gold, as the precious metal is often bought as an alternative to the dollar. Last week the dollar's slide to one-year lows against a currency basket sparked a rise back above $1,000 an ounce.

Gold's climb to 18-month highs of $1,1011.55 on Friday was accompanied by a sharp rise in net long positions on the COMEX futures market without a corresponding surge in physical demand, leading to fears the market could see a sharp correction.

Inflows into gold exchange-traded funds have slowed sharply since record levels of buying in the first quarter. The largest, New York's SPDR Gold Trust, said its holdings were unchanged on Friday for a fifth session, although some others have continued to see modest growth.

"We have seen a mixture of (rising) ETF positions and short-term speculative positions on COMEX driving prices, whereas at the start of the year we saw a very strong build in ETF positions," said Barclays Capital analyst Suki Cooper.

"If we continue to see that build in investment interest, prices will be maintained, but given how high and how strong those levels are, a potential correction could be in the offing."

CURRENCY GAINS

Dollar-priced commodities almost across the board suffered on Monday as gains in the U.S. currency made them more expensive for other currency holders, with oil and base metals slipping.

Weakness in crude prices can weigh on gold, which is often bought as a hedge against oil-led inflation.

On other markets, Wall Street opened lower and European stocks declined, with weaker macroeconomic data and a trade row between the United States and China weighing on buying interest. .EU

David Wilson, an analyst at Societe Generale, said gold was suffering from a recovery in the dollar, and that its technical break higher through key resistance levels was running out of steam.

"I think we'll settle back to a lower range, with support around $960 an ounce," he said. "India's jewelry demand has dropped off again, showing weaker physical demand, while there hasn't been any momentum from ETFs."

Among other precious metals, silver was at $16.49 an ounce against $16.74 late Friday, as a decline in base metals added to the downward momentum sparked by falling gold prices.

Platinum was at $1,312 an ounce against $1,315.50, while palladium was at $290 against $290.

South Africa's National Union of Mineworkers said on Monday its members at Anglo Platinum (AMSJ.J), the world's top platinum producer, had agreed to a one-year wage deal, averting a possible strike.

(Additional reporting by Jane Grieve; Editing by Jim Marshall)