By Clara Denina
LONDON (Reuters) - Gold pared early gains on Monday, having touched a two-week high that built on Friday's biggest one-day gain in nearly four months after surprisingly weak U.S. jobs data cut the chance of a June rise in U.S. interest rates.
Bullion, which has gained about 17 percent this year, had been under pressure in recent weeks as comments from senior U.S. central bank officials, including Fed chief Janet Yellen, boosted expectations of an imminent interest rate rise.
Higher interest rates increase the opportunity cost of holding non-yielding gold while bolstering the dollar.
Spot gold rose to its highest since May 24 at $1,248.40 an ounce, before easing and was down 0.3 percent at $1,240.50 by 1003 GMT.
Data on Friday showed that the U.S. economy created the fewest number of jobs in more than 5-1/2 years in May.
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The surprisingly weak employment number weighed on the dollar, which on Friday posted its biggest one-day drop in four months against a basket of major currencies, sending gold 2.8 percent higher for highest one-day percentage gain since Feb. 11.
Many speculative positions in gold had been reduced in the run-up to the U.S. data, so "there was a lot of adjustments to be done after the weak number", said Saxo Bank senior manager Ole Hansen.
"Since Friday, the technical outlook has improved ... and although we could see a temporary retracement to the $1,225 area, the outlook for gold is positive."
The focus for traders and investors shifted to a speech by Fed Chair Yellen at the World Affairs Council of Philadelphia at 1630 GMT, looking for further clues on interest rates.
Wall Street's leading banks unanimously expect the Fed to leave rates unchanged this month, a Reuters poll showed.
"Although prices could still work a bit higher from here over the course of the month, we think values will be hard pressed to push above the $1,275 range over the course of June," said INTL FCStone analyst Edward Meir.
"On the downside, another retest of $1,190 cannot be ruled out, especially if the dollar stabilizes on the back of stronger U.S. macro numbers."
Hedge funds and money managers reduced their bullish position in COMEX gold contracts in the week to May 31, government data showed.
Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.7 percent to 881.44 tonnes on Friday, the highest since October 2013.
Among other precious metals, spot silver was unchanged at $16.40 an ounce. Spot platinum gained 0.3 percent to $983.49 and palladium rose 0.5 percent to$553.47.
(Additional reporting by Vijaykumar Vedala in Bengaluru; Editing by David Goodman)