* Gold gives up Friday's post-payrolls gains
* Yen tumbles against U.S. dollar
* Silver, platinum and palladium at multi-week lows (Updates prices; adds comment, second byline, NEW YORK dateline)
By Marcy Nicholson and Jan Harvey
NEW YORK/LONDON, May 9 (Reuters) - Gold fell 2 percent in its biggest one-day drop in nearly seven weeks on Monday as the strengthening dollar and a sharper appetite for assets seen as higher risk sparked selling across commodities.
The metal's failure to break back above $1,300 in the wake of a weaker than expected U.S. jobs report on Friday is also leading some investors to cash in gold gains.
Spot gold XAU= was down 1.9 percent at $1,263.93 an ounce at 2:37 p.m. EDT (1837 GMT), erasing the 0.8 percent gain made on Friday after weak non-farm payrolls data. U.S. gold futures GCv1 for June settled down 2.1 percent at $1,266.60.
The sharp drop came after gold snapped four days of losses on Friday when the payrolls report showed that the U.S. economy added the fewest jobs in seven months in April, leaving some economists expecting only one interest rate hike from the Federal Reserve this year.
"Positioning has been stubbornly elevated so far this year, and as a result we hold the view that the market is going to continue consolidating within the range that has been established," UBS analyst Joni Teves said.
"The bounce in the dollar has also contributed to (the pullback), and this period is seasonally slow for gold."
The yen tumbled against the U.S. dollar as Japan signaled it was ready to intervene in the currency market, while a drop in oil prices undercut stocks. USD/ MKTS/GLOB
The 19-market Thomson Reuters CoreCommodity Index .TRJCRB fell 1.6 percent.
"Gold prices are solidly lower in early U.S. trading Monday, pressured by some profit-taking from recent gains and by better risk appetite in the general marketplace," Kitco Metals said in a note.
Hedge funds and money managers raised their net long positions in COMEX gold contracts to a 2011 high, data showed late Friday. have turned more positive towards prices due to rising inflation pressures and our view that real rates will remain depressed in developed markets beyond 2016," said BMI Research in a note, raising its 2016 gold price forecast to $1,275 an ounce.
Gold is up 19 percent this year as expectations for a near-term interest rate increase by Fed has faded.
Other precious metals followed gold lower, reaching multi-week lows.
Spot silver XAG= fell as much as 3.2 percent to $16.90 an ounce while platinum XPT= fell 3.6 percent to $1,036.35 an ounce, both two-week lows.
Palladium dropped 5.3 percent to $575.08 an ounce, the lowest since April 19.