(Corrects Feb. 5 story to say RBA policy meeting is on Tuesday, not Thursday, in paragraph 5)

* Benchmark index retreats from Friday's record high

* Miners log worst day since Sept 7

* RBA expected to hold rates on Feb 6 - Reuters poll

Feb 5 (Reuters) - Australian shares dropped 1% on Monday, retreating from a record high scaled in the prior session, as miners tracked lacklustre commodity prices lower, while investors remained on the sidelines ahead of a central bank policy decision.

The S&P/ASX 200 benchmark index closed lower at 7,625.9 points. The benchmark touched its record level of 7,703.60 on Friday.

Heavyweight mining index lost 3%, marking its worst session since Sept. 7, with behemoths BHP Group, Rio Tinto and Fortescue losing between 2.2% and 2.4%.

Prices of iron ore and base metals have been under pressure over the recent sessions as recovery prospects of the property sector in China remain uncertain, with a strong dollar, subdued demand and escalating geopolitical tensions in the Middle East further adding to the sell-off.

Back in Sydney, the Reserve Bank of Australia is expected to hold rates at 4.35% at its policy meeting on Tuesday, according to a Reuters poll.

Doug Symes, senior client adviser at Novus Capital, said he does not expect "any reduction in interest rates", and added that "the idea to increase interest rates to reduce inflation will be put on hold to just see what happens".

All major local banks - Commonwealth Bank of Australia , Westpac Banking Corp, ANZ Group, and National Australia Bank - expect the central bank to stand pat on rates until at least end-June.

Financials closed the session 0.2% lower after losing as much as 1.2%. Shares of CBA dropped 0.4% while ANZ lost about 0.2%.

Energy stocks ended 1.1% lower, with sector majors Woodside Energy and Santos losing 1.3% and 0.8%, respectively.

Gold stocks slumped 4.6%, with Northern Star losing 3.8% and Evolution Mining shedding 4.6%.

Among individual stocks, Silver Lake Resources emerged as the top loser, losing 11.5% after rival Red 5 announced acquisition of the mid-tier gold company.

Across the Tasman Sea, New Zealand's benchmark S&P/NZX 50 index ended largely flat.

(Reporting by Sneha Kumar in Bengaluru; Editing by Sherry Jacob-Phillips)