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Gold bounces off 5-1/2-month low as dollar retreats

Gold bangles are on display as a woman makes choices at a jewellery showroom during Dhanteras, a Hindu festival associated with Lakshmi, the goddess of wealth, in Kolkata, India October 28, 2016. REUTERS/Rupak De Chowdhuri

By Jan Harvey

LONDON (Reuters) - Gold rebounded on Monday from 5-1/2 month lows as the dollar shed some of the hefty gains made the previous week on bets that U.S. president-elect Donald Trump's plans for fiscal stimulus would prove inflationary.

Those assumptions have driven Treasury yields higher, denting interest in non-yielding bullion while boosting the U.S. currency. But as the dollar took a breather on Monday, gold clawed back some lost ground.

Lower prices are also tempting some consumers of physical gold back to the market, dealers said.

Spot gold was up 0.4 percent at $1,213.10 an ounce at 1500 GMT, while U.S. gold futures for December delivery were up $4.00 an ounce at $1,212.70.

"The dollar is off a little," Mitsubishi analyst Jonathan Butler said. "I think there's probably a re-evaluation of the pro-risk mentality that we've seen over the last couple of weeks. Very little has actually changed."

"The bounce that we're seeing (in gold) is probably on the back of the market moving on, to a degree."

The euro rose from an 11-month low against a broadly weaker dollar on Monday after former French president Nicolas Sarkozy was knocked out of the running for next year's presidential elections. [FRX/]

Gold has fallen more than $120 from its post-U.S. election peak on Nov. 9 as U.S. Treasury yields posted their biggest two-week rise in more than five years and the dollar shot higher.

Investors' appetite for gold showed signs of slackening. Holdings of the world's biggest gold-backed exchange-traded fund, SPDR Gold Shares, slid more than 19 tonnes last week, its biggest weekly outflow in four months. [GOL/ETF]

Speculators cut their net long position in COMEX gold for the first time in four weeks in the week to Nov. 15, and also reduced it in silver, U.S. Commodity Futures Trading Commission data showed on Friday.

"ETF investors... are continuing to withdraw capital on a massive scale," Commerzbank said in a note. "On Friday, there were renewed outflows of eight tons, and of nearly 71 tons in the last seven days of trading. That is the most pronounced outflow since July 2013."

"On the other hand, the retreat of speculative financial investors was not as dramatic as might have been expected in view of the slump in price following the U.S. election, meaning that there is further correction potential from this side."

However, gold premiums in India, the second largest consumer of the precious metal, jumped to two-year highs last week as jewellers ramped up purchases on fears the government might curb imports after withdrawing higher-denomination notes from circulation.

Among other precious metals, silver was up 0.3 percent at $16.63 an ounce, while platinum was 1.3 percent higher at $932.60, and palladium was up 0.7 percent at $729.50 an ounce.

(Additional reporting by Apeksha Nair in Bengaluru; editing by Mark Trevelyan and David Clarke)