By Clara Denina
LONDON (Reuters) - Gold was little changed on Monday, trading close to a six-week low and headed for its first monthly decline this year as improving prospects for the U.S. economy eroded investment interest and aroused an appetite for riskier assets.
Bullion prices have lost around $100 an ounce in the last 10 trading sessions from a six-month high hit in mid-March, on declining geopolitical tensions, stronger U.S. economic releases and comments by Federal Reserve Chair Janet Yellen earlier this month that interest rates could rise in the first half of 2015.
Spot gold was flat at $1,292.54 an ounce by 1437 GMT, having touched $1,285.34, its lowest level since February 12, on Friday. It was down 2.5 percent for the month.
Gold futures for April delivery fell $0.70 to $1,293.50 an ounce.
The dollar was down 0.2 percent against a basket of currencies, while 10-year U.S. Treasury yields rose above 2.7 percent, underpinned by expectations that the Federal Reserve will continue to taper its massive stimulus programme and pave the way for an eventual rate increase.
In her first public speech since becoming Fed chair two months ago, however, Janet Yellen on Monday strongly defended the central bank's policies of low interest rates and continued bond-buying.
Low interest rates, which cut the opportunity cost of holding non-yielding bullion above other assets, had been an important factor driving gold higher in recent years.
Data on Monday showed March euro zone inflation fell to its lowest since November 2009.
In the United States, the pace of business activity in the U.S. Midwest fell more than expected in March to its lowest level since August, resuming its recent trend of slower regional growth.
The main focus remains the U.S. nonfarm payrolls data on Friday. Analysts widely expect a stronger report on Friday, which will signal that a frigid winter was really the major reason for a string of soft U.S. data seen earlier this year.
"The relative strength of the dollar, improvement in some U.S. economic data and easing tensions between Russia and the West are all reflected in the current price action," Societe Generale analyst Robin Bhar said.
"We expect a strong non-farm payrolls number on Friday ... the normalisation of the U.S. economy was always going to be a bear factor for gold, it has not happened in January and February because of the cold weather."
JAPAN BRIGHT SPOT
Physical demand in Asia has been quiet due to recent volatility in gold prices, which have edged lower for two straight weeks.
Only Japan has seen some pick-up in demand as consumers brought forward their purchases ahead of a sales tax hike from April 1.
"This could be part of the reason we have seen such large short covering over the last few weeks on Tocom (about 350,000 ounces), taking the market almost to net flat," MKS Group said in a note.
Top consumer India will consider easing curbs on gold imports in consultation with the central bank, Finance Minister P. Chidambaram said.
Among other precious metals, platinum rose 0.9 percent to $1,415.74 an ounce and palladium gained 0.3 percent to $773.97 an ounce, as labour strikes continued in top producer South Africa.
Silver gained 0.1 percent to $19.79 an ounce.
(Additional reporting by A. Ananthalakshmi in Singapore; editing by Jason Neely and Anthony Barker)
