Gold at two-week high on weaker dollar, rate expectations

By Marcy Nicholson and Clara Denina

NEW YORK/LONDON (Reuters) - Gold firmed for the fourth straight session on Monday to its highest in more than two weeks, as the dollar extended losses and expectations rose that the Federal Reserve will hold off until at least September to raise interest rates.

Gold had dipped to a four-month low before the Fed met last week as concerns mounted over higher U.S. interest rates, which could dent demand for non-interest-bearing bullion.

Spot gold hit its highest since March 6 at $1,190.70 an ounce and was up 0.7 percent, by 3:05 p.m. EDT (1705 GMT).

U.S. gold futures for April delivery settled up $3.10 at $1,187.70 an ounce.

The dollar fell 0.9 percent against a basket of leading currencies. It came under pressure after the Fed last week downgraded its economic growth and inflation projections, signaling it is in no rush to push borrowing costs to more normal levels. [FRX/]

Consensus expectation for a U.S. interest rate increase has shifted, with most of Wall Street's top banks now expecting the central bank to hold off until at least September, a Reuters poll showed.

"All the gold bears are disappointed that there is not going to be a June rate hike, so now the speculation is going to focus on when the next rate hike is going to be," Citi analyst David Wilson said.

European shares fell, also on caution about whether Greece can reach agreement with creditors to secure fresh funds. [.EU]

Gold is usually seen as insurance against risk in times of financial or economic troubles when equities underperform.

Later in the day, Fed Vice Chair Stanley Fischer said the central bank is "widely expected" to begin raising interest rates this year, though the policy path remains uncertain.

"That was a fleeting factor," said Bill O'Neill, partner and co-founder of Logic Advisors in New Jersey, about the spot gold price extending gains after Fischer's comments.

"Perhaps it reinforces last week's Fed minutes. I don't see an imminent set rate hike."

Holdings of the SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, fell to the lowest since late January at 744.40 tonnes on Friday.

In China, the second biggest consumer, premiums over the London price eased to $4-$5 an ounce, lower than Friday's levels of $6-$7.

Platinum rose 1.1 percent to $1,146.75 an ounce, while silver gained 1.4 percent at $16.96 an ounce and palladium was down 0.5 percent at $772.50 an ounce.

(Additional reporting by A. Ananthalakshmi in Singapore; Editing by William Hardy, Susan Thomas and Jonathan Oatis)