* Britain expels Russian diplomats, drawing Moscow's ire
* New U.S. adviser seen backing stronger dollar (Recasts; updates prices; adds comment, byline, NEW YORK to dateline)
By Renita D. Young and Maytaal Angel
NEW YORK/LONDON, March 15 (Reuters) - Gold prices dipped on Thursday, under pressure from a stronger U.S. dollar, although tensions between Britain and Russia limited the precious metal's decline a day after it hit a one-week high.
The dollar rose versus a currency basket .DXY as traders, awaiting next week's Federal Reserve meeting, eyed data that showed the number of Americans filing for unemployment benefits fell last week. FRX/
Moscow said it would retaliate against London's move to expel 23 Russian diplomats over a nerve toxin attack on a Russian former double agent in Britain. gold XAU= was down 0.5 percent at $1,317.52 per ounce by 1:40 p.m. EST (1740 GMT), edging away from Wednesday's one-week high, while U.S. gold futures GCcv1 for April delivery settled down $7.80, or 0.6 percent, at $1,317.80 per ounce.
"The headwinds gold faces are people starting to talk about the interest rate increase and the possibility of a fourth interest rate hike," said Chris Gaffney, president of world markets at EverBank.
Gold is highly sensitive to rising U.S. interest rates, because it becomes less attractive to investors since it does not bear interest. A stronger dollar makes dollar-priced gold costlier for investors using other currencies.
"Gold is finding support from the escalating political crisis between the UK and Russia," Commerzbank (DE:CBKG) said in a note, but added it could face headwinds after the U.S. president's new economic adviser Larry Kudlow had spoken out in favor of a strong dollar. some market participants said the dollar strengthened after Kudlow's comments, others questioned the net effect of his statements.
"I think Kudlow's comments will probably support more of a trade war rhetoric than a stronger dollar," said a Hong Kong-based trader, adding "gold needs to close above the $1,330 level to start getting some traction."
U.S. stocks opened higher, supported by strong economic data, although fears that Trump's decision to impose fresh tariffs on China may escalate into a trade war simmered in the background. .N
"Instead of moving on fundamentals, the market is moving on rhetoric these days," said Walter Pehowich, executive vice president of investment services at Dillon Gage Metals. He noted that Treasuries and the greenback have been rangebound, keeping gold rangebound.
Silver XAG= fell 0.5 percent at $16.42 per ounce after seeing a 9-day low of $13.35. Platinum XPT= fell 0.7 percent at $951.49 per ounce.
Palladium XPD= dropped 0.4 percent at $983.20 per ounce after hitting $1,006.30 in the previous session, a high since March 1.