* Fed officials hint at possible rate hike in June
* Dollar index rises, weighing on bullion
* Coming up: minutes of Fed's April meeting
(Updates throughout, changes dateline from BENGALURU)
By Clara Denina
LONDON, May 18 (Reuters) - Gold fell almost one percent on
Wednesday as the dollar hit a three-week high after strong U.S.
economic data and comments from Federal Reserve officials
bolstered expectations that the central bank could soon hike
interest rates.
A Fed policymaker said on Tuesday he will push for an
interest rate hike in June or July, and two others predict up to
three rate increases this year.
Gold is highly sensitive to rising rates, which lift the
opportunity cost of holding it.
Spot gold XAU= dipped 0.7 percent to $1,271.60 an ounce at
0916 GMT, while U.S. gold futures GCcv1 fell 0.3 percent to
$1,273.20.
U.S. data on Tuesday showed consumer prices recorded their
biggest increase in more than three years in April. Housing
starts and industrial production rebounded strongly last month,
suggesting the economy was regaining steam, adding to the case
for an early rate hike.
"The dollar is getting some attention today following the
CPI data, and that's likely to weigh on gold in the short term,"
Saxo Bank senior manager Ole Hansen said.
"However, if inflation is really starting to make a return
and that dollar strength starts being driven by inflation
concerns, there is a positive story for gold in the longer
term," Hansen added.
Gold is usually seen as an hedge against inflation.
Bullion has rallied 20 percent this year on speculation that
the Fed has slowed down its expected pace of rate increases on
concerns about global economic growth and the volatility of
stock markets.
In its April policy statement, the Fed indicated it wants to
feel more confidence in the economy's overall health before
hiking rates again.
Traders will be eyeing the Fed's April meeting minutes, due
later in the day, for further cues on U.S. interest rate
outlook.
"A lot of investors are holding back waiting for the FOMC
minutes," said Brian Lan, managing director at Singapore-based
gold dealer GoldSilver Central.
"Officials have been saying they wish to raise the rates but
unless and until Fed Chair Janet Yellen mentions something I
don't think the market will actually take that into
consideration," he added.
Holdings in SPDR Gold Trust GLD , the world's largest
gold-backed exchange-traded fund, rose 0.56 percent to 855.89
tonnes on Tuesday, the highest since November 2013. GOL/ETF
Spot silver XAG= slipped 1.1 percent to $17.00 per ounce,
spot platinum XPT= dropped 0.8 percent to $1,042 per ounce and
spot palladium XPD= fell 0.1 percent to $580.87 an ounce.