By Marcy Nicholson and Clara Denina
NEW YORK/LONDON (Reuters) - Gold edged lower on Tuesday and was heading for a second straight monthly fall, pressured by expectations the U.S. Federal Reserve will increase interest rates this year.
Bullion has fallen nearly 3 percent, since hitting a three-week high above $1,200 an ounce last week, as the dollar gained after Federal Reserve Chair Janet Yellen on Friday signaled a rate hike is well on the central bank's cards later this year.
Citing sustained gains in the U.S. economy, Yellen's remarks halted gold's longest rally since 2012, that had been spurred by hopes the Fed would take it slow in raising rates.
"Gold's inability to hold over the psychological $1,200 level, which it recently cleared, suggests that bullion may be susceptible to a further consolidation of gains," said HSBC analyst James Steel.
"Bullion may weaken further in the near term, we believe."
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Spot gold was down 0.1 percent at $1,184.31 an ounce by 0207 GMT, after falling as much as 1.4 percent to $1,182.05 on Monday.
Bullion is down more than 2 percent so far in March, but nearly flat for the quarter.
U.S. gold for April delivery GCcv1 edged up 0.1 percent to $1,186 an ounce.
Investors are eyeing U.S. jobs data on Friday with a robust report likely to lift expectations that policymakers could lift U.S. interest rates sooner than later.
Economists polled by Reuters forecast a 245,000-gain in U.S. jobs in March. U.S. jobs increased by 295,000 in February, marking the 12th straight month that employment gains have been above 200,000, the longest such run since 1994.
But outside the labour market, there were still signs that the U.S. economy hit a soft patch in the first quarter. Consumer spending barely rose in February as households used the windfall from lower gasoline prices to boost savings to the highest level in more than two years. (Full Story)
In other precious metals, spot palladium climbed 1.1 percent to $734.25 an ounce, after dropping to $721.98 on Monday, its weakest since February last year.
(Additional reporting by Manolo Serapio Jr in Singapore; editing by Susan Thomas, William Hardy and Diane Craft)