By Jan Harvey
LONDON (Reuters) - Gold recovered from early losses to edge higher on Monday as support from the standoff in Ukraine offset pressure from last week's strong U.S. payrolls data and weakness in other commodities after a sharp drop in Chinese exports.
Russian foreign Minister Sergei Lavrov told President Vladimir Putin on Monday Russia's position on Ukraine was at odds with the West, and that U.S. Secretary of State John Kerry had declined an invitation to visit Russia for further talks.
Russian news agency Interfax earlier quoted a Ukrainian base commander as saying Russian troops opened fire during the takeover of a Ukrainian military post in Crimea.
Spot gold was up 0.2 percent at $1,342.60 an ounce at 1214 GMT, while U.S. gold futures for April delivery were up $4.70 an ounce to $1,342.90.
"Stock market weakness and gold strength this afternoon seem to stem back to the news from Crimea about shots being fired," Saxo Bank's head of commodity strategy Ole Hansen said. "It highlights the nervousness about what can happen."
"Short-term traders in gold were playing it from the short side earlier today, so it's back to square one for many."
The precious metal fell as low as $1,328.86 in earlier trade, extending a 0.8 percent drop it made on Friday after U.S. payrolls data beat forecasts, suggesting the Federal Reserve's stimulus tapering efforts will stay on course.
On the wider markets, European shares erased early gains to fall 0.7 percent after reports of renewed unrest in Ukraine.
Commodities in general sold off after a surprise fall in China's exports, with copper sinking to 8-1/2-month lows, while oil lost more than a dollar and Shanghai-traded commodities slumped.
China, the world's biggest consumer of many commodities including gold, said on Saturday its exports unexpectedly tumbled in February, swinging the trade balance into deficit.
GRAPHICS:
2014 metal returns: http://link.reuters.com/cag37s
2014 commod returns: http://link.reuters.com/reb25t
Gold/silver ratio: http://link.reuters.com/kuq35s
TWO-WAY FLOWS
Chinese gold prices were trading at a discount of $5-$6 an ounce to spot prices on Monday, traders said, in a sign of weak demand. Prices were at a premium of more than $20 at the beginning of the year.
Two-way flows were evident in Asian gold trading overnight, MKS said in a report. "Once the Shanghai Gold Exchange opened some aggressive selling ensued, driving the price below $1,330," it said. "Once again retail bids below this level emerged and supported the market."
Investor sentiment towards gold has been positive this year after a 28 percent drop in prices in 2013.
Hedge funds and money managers raised their bullish bets in gold futures and options for a fourth consecutive week as geopolitical tensions boosted speculative interest to the highest in more than a year, according to Friday data from the Commodity Futures Trading Commission.
The world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, said its holdings rose 1.5 tonnes on Friday, its first inflow since February 25.
Among other precious metals, silver was flat at $20.88 an ounce.
The gold/silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, hit a fresh five-week high at 64.4 as silver underperformed on Monday.
Spot platinum was down 0.2 percent at $1,475 an ounce, while spot palladium was down 0.9 percent at $772.40 an ounce.
(Additional reporting by A. Ananthalakshmi in Singapore; Editing by Anthony Barker and David Evans)
