* Stock markets extend recent selloff
* Silver firms after biggest 1-day drop since Dec 2016
* GRAPHIC-2018 asset returns: (Recasts throughout; updates prices, headline; adds comment, NEW YORK to dateline)
By Renita D. Young and Jan Harvey
NEW YORK/LONDON, Feb 5 (Reuters) - Gold prices steadied on Monday as a slide in stock markets helped the precious metal claw back some lost ground after logging its biggest one-day loss in two months in the previous session.
Prices fell 1.2 percent on Friday after stronger-than-expected U.S. payrolls data shored up expectations that a pickup in inflation would spur further U.S. interest rate hikes this year. That boosted the U.S. dollar, in which gold is priced.
The greenback rose slightly on Monday, while stock markets were routed around the globe as resurgent U.S. inflation raised the possibility that the Federal Reserve would tighten policy more aggressively than previously expected. Spot gold steadied at $1,334.40 an ounce by 1:34 p.m. EST (1834 GMT), still well below late January's 17-month high of $1,366.07. U.S. gold futures for April delivery settled down 80 cents, or 0.1 percent, at $1,336.50.
"Gold is going to start to be noticed as an inflation hedge more so than before, because the stock market seems to be not just in a selloff, but in a probable profit-taking move," said George Gero, managing director of RBC Wealth Management in New York.
U.S. stocks extended their selloff after Friday's drop on the back of rising bond yields and prospects for increasing inflation. "I would expect the recent correction in equity prices to show a little bit more bid (in gold), but at the moment it doesn't seem to be the case," said Daniel Ghali, commodities strategist at TD Securities in Toronto.
"That reinforces the argument that we might see a little consolidation in gold."
Gero said gold purchases ahead of the Chinese Lunar New Year in mid-February also supported prices.
Gold normally responds to inflationary signs, but this time, even with Chinese Lunar New Year and India showing demand, the recent lower prices are keeping a rally muted, he added.
"Gold may pick up later in the week as equity sellers allocate more to precious metals," Gero wrote in a market note.
Spot silver rose 0.8 percent at $16.72 an ounce after matching the previous session's five-week low of $16.54. It fell 3.7 percent on Friday in its biggest one-day decline since December 2016.
Platinum was flat at $986.24 an ounce, still hovering near a three-week low, while palladium dropped 1.5 percent to $1,031.20.
(Additional reporting by Nallur Sethuraman in Bengaluru; Editing by Louise Heavens and Lisa Von Ahn)
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