* Dollar index firm, hovers below two-month high
* Silver set for biggest monthly decline since September
2014
(Updates prices; adds comment, second byline, NEW YORK
dateline)
By Marcy Nicholson and Clara Denina
NEW YORK/LONDON, May 31 (Reuters) - Gold rose 1 percent on
Tuesday, rebounding from the prior session's
three-and-a-half-month low, but remained on track for its
biggest monthly decline since November on dollar strength and
growing expectations of an imminent U.S. interest rate hike.
Spot gold XAU= was up 1 percent at $1,216.80 an ounce at
2:38 p.m. EDT (1838 GMT), after Monday's fall to its lowest
since Feb. 17 at $1,199.60. It was on track to close May down
5.9 percent.
U.S. gold futures for August delivery GCv1 settled up 80
cents at $1,217.50 an ounce.
U.S. consumer spending rose by the most in more than six
years in April as households stepped up purchases of
automobiles, suggesting an acceleration in economic growth.
"The better spending number will leave Q2 tracking higher,
but the lack of acceleration in core PCE (inflation) means that
there's no rush for the Fed to hike as early as June," said
Royce Mendes, director and senior economist at CIBC Capital
Markets in Toronto.
An increase in U.S. rates would raise the opportunity cost
of holding gold, which does not earn interest. It would also
bolster the dollar, making gold more expensive for buyers in
other currencies.
Gold has been under pressure since release of the minutes
from the Federal Reserve's April meeting boosted expectations of
an imminent rate rise.
"If you get a pick-up in growth expectations in the U.S. and
aggressive rate hikes from the Fed, then you could revisit the
low of the year (at $1,127.80), but I see that as an unlikely
scenario," ABN Amro analyst Georgette Boele said, adding the
next support level is the 200-day moving average of $1,163.
Spot silver XAG= was headed for its biggest monthly loss
since September 2014, down more than 10 percent. It touched a
seven-week low in the previous session before recovering to
$16.06 on Tuesday.
U.S stocks were flat to lower while the dollar .DXY was
firm, hovering below its highest in two months against a basket
of currencies. MKTS/GLOB FRX/
Investors will monitor May U.S. private-sector ISM
manufacturing data, due on Wednesday, and nonfarm payrolls on
Friday. Solid readings could heighten expectations for a move as
early as the Fed's June 14-15 policy meeting. ECONUS
Spot platinum XPT= rose 1.4 percent to $976.99 an ounce,
having hit its lowest in seven weeks in the previous session.
Spot palladium XPD= gained 0.8 percent to $543.81 but was
still heading for its biggest monthly loss since November.