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LONDON (Reuters) - Gold steadied on Thursday after its biggest one-day drop in more than six weeks, with a retreat in the dollar arresting the slide, though moves were muted as markets await the outcome of the looming French presidential election.
Polls ahead of the French vote, which begins this weekend, give both far-right and far-left candidates a chance of making it into next month's run-off, though centrist candidate Emmanuel Macron is shown in the lead.
Spot gold was at $1,279.56 an ounce by 1330 GMT, little changed from $1,278.91 late on Wednesday. The metal hit a five-month high of $1,295.42 on Monday before pulling back.
U.S. gold futures for June delivery were down $1.90 an ounce at $1,281.50.
"Even though momentum has been positive there are other factors preventing a quick move higher from here - the sentiment is still that there will be stronger data from the U.S., and yields will probably rise. That will likely limit the upside (for gold)," said ABN Amro analyst Georgette Boele.
Improving appetite for equities, which edged higher in Europe and the United States, was also undermining demand for gold as a haven from risk, she added.
The dollar index held to earlier losses on Thursday as the latest data on domestic jobless claims and business activity in the Mid-Atlantic region failed to change traders' expectations of modest U.S. economic growth and low inflation.
Holdings of the world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares, rose 11.8 tonnes on Wednesday for their biggest one-day inflow since September, data from the fund showed.
However, spot prices fell 0.8 percent on Wednesday, their biggest one-day drop since March 7, after last week's rally failed to beat resistance created by a declining trendline from the 2011 record high. Prices are so far on track to fall this week after five straight weeks of gains.
"While the metal is well positioned for a test of $1,300 with geopolitical concerns underpinning its safe-haven status, the failed tests of $1,290 are beginning to weigh upon investor confidence," MKS said in a note.
"Support toward $1,275 should keep the price action buoyant over the short term, especially leading into this weekend's French election."
Among other precious metals, silver was 0.1 percent lower at $18.06, while platinum was up 1.3 percent at $975.90. Palladium was the strongest gainer of the day, rising 3 percent to $797.98.
Additional reporting by Nallur Sethuraman in Bengaluru; Editing by Edmund Blair and David Goodman