* Spot gold could test resistance at $1,237/oz -technicals
* Dollar index drops to six-week low
* SPDR gold holdings down 0.35 pct on Friday
(Recasts, updates prices, adds detail and quote; changes
By Maytaal Angel
LONDON, March 20 Gold prices scaled a two-week
peak on Monday as the dollar slumped to a six-week low after a
G20 weekend summit that was dominated by the U.S.
administration's protectionist stance on global trade.
The precious metal has been rising since last Wednesday,
when the dollar dropped after the U.S. Federal Reserve raised
interest rates but stopped short of predicting a sharper
acceleration in monetary tightening over the next two years.
Gold is highly sensitive to falling interest rates, which
decrease the opportunity cost of holding non-yielding bullion
while weighing on the dollar, in which it is priced. A weaker
dollar also increases the buying power of non-U.S. investors.
"Overall the geopolitical outlook still points to several
hotspots ... and we're not going to see a focus on rate rises
for the foreseeable future now, because that's out the way. Over
the next few weeks one has to favour the upside," said Ole
Hanson, head of commodity strategy at Saxo Bank.
Spot gold rose 0.3 percent to $1,232.36 an ounce by
1111 GMT, having earlier touched $1,235.50, its highest since
U.S. gold futures gained 0.2 percent to $1,232.50.
Gold has rebounded more than $35 from the low hit before the
Fed policy announcement last Wednesday, while the dollar has
fallen 1.7 percent from its high of 101.71 the same day.
"The dovish outlook ... following last Wednesday’s Fed
meeting is clearly still having an impact. This is likely to
lure a number of speculative financial investors back into gold
after this group massively reduced their net long positions in
the run-up to the meeting," Commerzbank said in a note.
Money managers reduced their net long, or buy, positions in
gold by 44,058 lots to 49,835 lots during the week to March 14,
the lowest since early January. Managed short positions rose by
nearly 10,000 lots to 70,454.
Spot gold is expected to test resistance at $1,237, a break
above which could lead to gains to $1,243, Reuters technical
analyst Wang Tao said.
Denting the bullish gold narrative somewhat, holdings of
SPDR Gold , the world's largest gold-backed exchange-traded
fund, fell 0.35 percent to 834.10 tonnes on Friday.
Spot silver rose 0.4 percent to $17.39 an ounce,
while platinum was up 0.5 percent at $962.50 and
palladium firmed by 0.2 percent to $774.20.
(Additional reporting by Nallur Sethuraman; Editing by David