By Frank Tang and Clara Denina
NEW YORK/LONDON (Reuters) - Gold fell on Tuesday, as a stronger dollar and rebound in U.S. stock prices prompted investors to take profits in bullion after five straight sessions of gains.
The S&P 500 equities index rose 0.7 percent after data showing a shrinking U.S. trade gap enticed buyers back into stocks after three straight days of losses. The dollar strengthened on the trade data, which also pressured gold.
Analysts said gold appeared to find support from funds' index rebalancing and equities' losses following last year's tumble in bullion prices and stock markets' record run-up.
However, they expected gold prices to come under pressure from a rising interest-rate environment after the Federal Reserve announced plans to trim its massive bond-buying plan and as the U.S. economic outlook improves.
"While further upside cannot be ruled out in the short term... the macro backdrop remains intact and so are the challenges that are in store for gold for the rest of this year," said UBS precious metals analyst Joni Teves.
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Spot gold fell 0.5 percent to $1,231.50 an ounce by 3:28 p.m. EST (2028 GMT).
U.S. gold futures for February delivery settled down $8.40 at $1,229.60 an ounce, with trading volume about 30 percent below its 30-day average, preliminary Reuters data showed.
Gold prices had gained nearly 4 percent in the previous five sessions as equities prices dropped after record gains in 2013.
Bullion posted a 28 percent drop last year, its largest in more than three decades, as the U.S. Federal Reserve announced plans to unwind its ultra-loose monetary policy.
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A survey by online precious metals market BullionVault said physical gold buying among private investors fell last month.
The Gold Investor Index, which measures the balance of customers adding to gold holdings over those reducing them, fell to a five-month low of 52.9 in December from 54 in November. A reading of 50 signals an equal number of net gold buyers and sellers.
In the Asian physical market, Indian officials are in talks to cut a record high import duty on gold and relax rules on exports, government sources said. The measures helped narrow the trade deficit, but now threaten to encourage smuggling.
Traders will now focus on U.S. non-farm payrolls and trade numbers on Friday, which will be preceded by Wednesday's minutes of the Federal Reserve's December policy meeting.
Silver, whose price tends to be more volatile than gold, fell 1.7 percent to $19.81 an ounce, well below a four-week high of $20.33 in the previous session.
Platinum was down 0.2 percent at $1,409.74 an ounce, having risen to a seven-week high of $1,420.75 on Monday, while palladium gained 0.4 percent at $738.25 an ounce.
(Additional reporting by A. Ananthalakshmi in Singapore; Editing by William Hardy, David Goodman and David Gregorio)