* Specs raise net shorts in gold to record in week ended July 31
* SPDR gold holdings down 0.26 pct on Friday (Updates prices, headline; adds comment, second byline, previous dateline LONDON)
By Renita D. Young and Eric Onstad
CHICAGO/LONDON, Aug 6 (Reuters) - Gold prices fell on Monday under pressure as a firmer dollar and expectations for further interest rate hikes by the U.S. Federal Reserve offset U.S. ‘snapback’ sanctions targeting the purchase of precious metals.
“Overall the bears remain in control and they continue to increase their short positions - both the net and gross are hitting records,” said Ole Hansen of Saxo Bank.
Hedge funds and money managers added 13,931 contracts to their net short position in the week to July 31, bringing it to 41,087 contracts, the biggest since records became publicly available in 2006.
Spot gold was down 0.32 percent at $1,209.18 an ounce by 12:44 p.m. CDT (1744 GMT).
U.S. gold futures for December delivery settled down $5.50, or 0.5 percent, at $1,217.70 per ounce.
The Trump administration will aggressively enforce economic sanctions that it is reimposing on Iran this week and expects the measures to have a significant impact on the Iranian economy, senior U.S. administration officials said.
Those sanctions include precious metals, U.S. bank notes, steel and coal.
People in Iran are buying gold to shore up their currency, said George Gero, managing director of RBC Wealth Management.
“But that demand in Iran has not offset the selling of gold in the Western countries because of the higher (U.S.) interest rates and the higher U.S. dollar,” Gero explained.
New York Fed Markets Chief Simon Potter on Friday reiterated the U.S. central bank’s intention to raise interest rates.
Gold is sensitive to higher U.S. interest rates, because it costs to store and does not draw interest payments.
The dollar rose against a basket of currencies, building on two consecutive weeks of gains, as investors bet that trade war rhetoric and a strong U.S. economy would continue to drive the currency higher.
Investors have largely been buying the dollar as a safe haven asset rather than gold as the U.S.-China trade dispute escalates.
China proposed retaliatory tariffs on $60 billion of U.S. goods on Friday, after U.S. President Donald Trump’s administration proposed a higher, 25 percent tariff on $200 billion of Chinese imports.
Silver fell 0.3 percent to $15.33 an ounce.
“Silver is doing reasonably well. Normally we’d find silver underperforming when gold is sold off, but the selling appetite seems to be relatively muted,” Hansen said.
Palladium declined 0.02 percent to $909.30 an ounce, after hitting $900.25, its lowest since July 23. Platinum dropped 0.3 percent to $824.40 per ounce. (Additional reporting by Apeksha Nair in Bengaluru. Editing by Adrian Croft, David Evans and Richard Chang)