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LONDON (Reuters) - Gold eased on Monday as losses on wider markets prompted some investors to cash in gains from the metal's biggest one-day price rise in over three years, but it held near its highest in almost a month on speculation about U.S. monetary easing.
Gold broke ranks with riskier assets on Friday to surge 4.3 percent despite a sell-off elsewhere after a surprisingly weak U.S. payrolls report stoked talk that further stimulus measures may be necessary to reignite growth.
"We had a non-farm payrolls number that came in far below expectations, and also a rise in the unemployment rate," Peter Fertig, a consultant at Quantitative Commodity Research, said. "That could give some incentive for the voting members of the Federal Open Market Committee (to act)."
A fresh round of quantitative easing, which basically translates to printing money, would likely undermine the dollar and confidence in the wider currency markets, benefiting gold.
That could provide scope for further gains after Monday's pause, Fertig said. "Given the jump we had on Friday in gold, it's quite normal to see some consolidation," he said.
Spot gold was down 0.3 percent at $1,620.89 an ounce at 10:16 a.m. EDT (1416 GMT). Its rally on Friday took it to a high of $1,629.41, its highest since May 8.
Worries over the pace of the U.S. recovery, the euro zone debt crisis and the softer rate of Chinese growth combined on Monday to pressure assets seen as higher risk. Wall Street stock markets gave up early gains after weak sessions in Europe and Asia, where Tokyo stocks hit a 28-year low. .EU <MKTS/GLOB>
Other commodities also fell, with oil and Shanghai copper hitting multi-month lows on Monday and some Chinese commodities reaching their downside limits. <O/R> <COM/WRAP>
The euro recovered from a two-year low against the dollar, but mounting concerns over Spain's banking sector and global economic growth are likely to keep the single currency under pressure. <FRX/>
German Bunds edged off Friday's record high, but remained extremely elevated. <GVD/EUR>
Gold has traded in line with other commodities and against the dollar in recent months, reversing the pattern of much of 2011, but its link with 'riskier' assets is weakening as focus shifts from Europe's debt problems to U.S. growth issues and the prospect of monetary easing.
Extremely low returns on perceived safe havens like U.S. and German bonds are also helping gold.
"Up until very recently, lower U.S. bond yields were also accompanied by lower gold prices... primarily because as the euro zone sovereign crisis intensified, capital moved into U.S. Treasuries and other perceived safe government bonds," HSBC said in a note. "As the dollar rallied in reaction to capital inflows, gold prices, which are negatively correlated with the U.S. dollar, fell."
"Gold prices appear to have very recently broken away from this relationship and have turned higher despite further declines in U.S. Treasury yields, which have reached 60-year lows," it said. "Low U.S. and German bond yields leave investors with few quality assets to choose from and may benefit gold."
Among other precious metals, silver was down 0.8 percent at $28.40 an ounce, underperforming gold. Silver prices rallied by the most since February 28 on Friday, up 3.6 percent.
Spot platinum was down 0.5 percent at $1,433.99 an ounce, while spot palladium was up 0.8 percent at $613.25 an ounce. Both platinum group metals underperformed gold and silver on Friday, with platinum rising 2.3 percent and palladium just 0.3 percent.
The gold/platinum ratio, which measures the number of platinum ounces needed to buy an ounce of gold, hit its highest for more than four months on Monday at 1.13, while gold's premium over platinum rose above $190 for the first time since early January.
Reporting by Jan Harvey; Editing by Anthony Barker