PRECIOUS-Gold drops as dollar gains; loose central bank policy supports

* Comex gold speculators cut bullish position
    * Coming Up: U.S. Existing home sales Feb at 1400 GMT

 (Adds comment, detail, updates prices)
    By Melanie Burton
    MELBOURNE, March 21 (Reuters) - Spot gold fell more than 1
percent on Monday, as the dollar regained some ground in holiday
thinned trade, but traders said the metal was well supported
given a dovish stance from U.S. and European central banks.
    Central banks, however, are leaving themselves with fewer
policy tools, which means there's a diminishing window for fresh
upside for gold based on further easing steps, said chief
investment officer Jonathan Barratt of Ayers Alliance in Sydney.
    "In my mind there's still concerns out there on price."
    Spot gold fell by 1 percent to $1,242.60 a tonne by
0628 GMT, having finished last week a tad higher. Prices are
consolidating below a 14-month peak of $1,282.51 struck on March
11, which was the loftiest since Jan 2015. Prices had slumped
below $1,050 a tonne in December. 
    U.S. gold eased by 0.9 percent to $1,243.20.
    "Due to the Easter holiday, the market will probably 
consolidate," a trader in Singapore said. "Overall the market
trend looks weak but well supported, so if there are any moves,
it's just to square positions for the week due to the holidays."
    Market indicators are flashing signs that investors see
inflation - after it was almost non-existent since the credit
crisis - on the rise, despite scepticism from the Fed and the
relatively slow pace of U.S. economic growth. 
    Inflation tends to burnish the investment allure of
commodities because it consists of a rise in the value of hard
    Eroding support for precious metals, the dollar hit a
session high, paring losses in the wake of dovish signals from
the Federal Reserve.
    Money managers trimmed their bullish gold bets from a
13-month high in the week to March 15, as they also cut a net
long position in copper, U.S. Commodity Futures Trading
Commission data showed on Friday. 
    In other metals, platinum and palladium edged
down half a percent to $963.10 and $586.10 respectively. 

 (Reporting by Melanie Burton; Editing by Joseph Radford and
Richard Pullin)