Gold eases as dollar up, weak stocks limit losses

By Frank Tang and Jan Harvey

NEW YORK/LONDON (Reuters) - Gold prices dropped in quiet trade on Monday as a bounce in the dollar prompted investors to take profits, but lower global stock markets limited losses and kept intact the metal's status as a refuge from riskier investments.

Spot gold was at $913.10 an ounce at 1:36 p.m. EDT, down 0.3 percent from its late Friday quote of $916.05 in New York on Friday.

U.S. gold futures for June delivery settled down $1.40 at $913.50 an ounce on the COMEX division of the New York Mercantile Exchange after trading in a narrow range of less than $10.

Analysts said gold was trapped between opposing forces as its role as a hedge against economic uncertainty vied with perceptions from some quarters that the global economic downturn might be bottoming out.

"We've got a bit of a tug-of-war situation for gold now -- support from dollar weakness but pressure as equities outperform overall," said Tom Kendall, analyst at Mitsubishi Corp in London.

"We need a daily close above $919 to turn the technical picture bullish," he added.

Global stocks as measured by MSCI's all-country index .MIWD00000PUS were 0.7 percent lower on Monday. But they were working on their third month of gains as investors tried to determine whether the global economic slump is moderating, while Wall Street fell over 1 percent.

On the foreign exchange markets, the dollar rebounded from a four-month low against a basket of currencies .DXY, making dollar-priced bullion pricier for non-U.S. investors.