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PRECIOUS-Gold near 3-week high after U.S. jobs data triggers short-covering

* Robust U.S. jobs data supports Fed rate hike next week
    * Specs raise short positions to record high in week to Dec.
1
    * Dollar weakness could trigger more short-covering - trader

 (Updates prices)
    By A. Ananthalakshmi
    SINGAPORE, Dec 7 (Reuters) - Gold held near a three-week
high on Monday, boosted by short-covering after strong U.S.
nonfarm payrolls data bolstered the case for a Federal Reserve
rate hike next week.
    With speculators holding record short positions in COMEX
gold and the dollar failing to gain much traction post payrolls
data, some believe gold prices could see more upside.     
    U.S. nonfarm payrolls rose 211,000 last month, above market
expectations and removing most doubts about the first Fed rate
hike in nearly a decade at the central bank's next policy
meeting on Dec. 15-16. 
    Spot gold slipped 0.2 percent to $1,084.80 an ounce
by 0619 GMT, but held near the $1,088.70 level hit in the
previous session, the highest since Nov. 16.     
    Gold gained 2.3 percent on Friday after slumping to a
near-six-year low earlier in the week.
    Typically robust data would have sent gold lower as it would
support a rate hike, but investors on Friday chose to cover
their shorts. Higher rates tend to weigh on non-interest-paying
gold by increasing the opportunity cost of holding it.
    "If the dollar is unable to rally we may see further (short)
squeezes towards $1,095-$1,100 in the short term leading into
next week's FOMC meeting," said MKS Group trader Sam Laughlin,  
  adding that light profit-taking was likely during Asian trade.
    Hedge funds and money managers hiked their net short
position in COMEX gold futures and options to 17,949 contracts
in the week to Dec. 1, according to U.S. Commodity Futures
Trading Commission data on Friday. 
    The dollar index rose 0.8 percent on Friday, but analysts
believe the greenback's reaction to the jobs data was modest
with the Fed set to hike rates next week. 
    Investors' focus has shifted to the pace of the tightening
cycle following the initial move.  
    "Following another solid U.S. labour market report, it is
hard to think of anything that will now stand in the way of the
Fed hiking next week," ANZ said, commenting on the overall
markets.
    "While the Fed's decision is shaping as somewhat of a done
deal, how the market reacts to a Fed hike still contains an
element of uncertainty. The logical reaction may not be what
transpires, at least not initially," it said.
    
    PRICES AT 0619 GMT     
 Metal            Last     Change   Pct chg
                                            
 Spot gold         1084.8    -1.81     -0.17
 Spot silver        14.53   -0.017     -0.12
 Spot platinum      878.5    -0.49     -0.06
 Spot palladium     558.5    -5.33     -0.95
 Comex gold        1084.1        0         0
 Comex silver       14.54    0.012      0.08
                                            
 COMEX gold and silver contracts show the
 most active months
 
 (Editing by Tom Hogue and Biju Dwarakanath)
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