Gold dips after four-day rally but holds near two-week high

By A. Ananthalakshmi

SINGAPORE (Reuters) - Gold gave back some gains from a four-day rally on Tuesday but the metal was still near a two-week high touched earlier as expectations grew that a hike in U.S. interest rates could be pushed to September.

Spot gold dipped slightly to $1,186.26 an ounce by 0300 GMT. The metal had climbed to $1,191.50 on Monday, its highest since March 6, as it rose for a fourth straight day.

Investors favoured bullion over the last few days as the dollar slumped after the Federal Reserve sounded cautious last week on the U.S. economy and the pace of its rate-hike path. Gold, a non-interest paying asset, had been trending downwards before the rally on expectations of a near-term rate increase.

Consensus expectations for a bump in U.S. interest rates has shifted, with most of Wall Street's top banks now looking for the central bank to hold off until at least September, rather than making a move in June, a Reuters poll showed.

"We suspect that gold will very much be influenced on what the dollar will do over the short term," said INTL FCStone analyst Edward Meir.

With the dollar sell-off likely to continue for a few more days, gold should enjoy additional support, Meir said.

A weaker dollar makes the metal cheaper for holders of other currencies and typically increases its appeal as a hedge.

Still, some analysts warned that gold prices could face resistance on the way up.

"The gold rally looks intact and we believe the market is firm, but it is close to running into upside resistance at $1,200, a clear psychological level," said HSBC analyst James Steel.

Comments by Fed officials on Monday appeared to fall in line with the U.S. central bank's policy statement last week that suggested a less aggressive timetable for hiking interest rates.

The Fed is "widely expected" to begin raising interest rates this year though the policy path remains uncertain, the central bank's second-in-command said on Monday.

Traders will be eyeing U.S. data and more comments from Fed officials this week for clues about the economy and the U.S. central bank's monetary policy.

(Reporting by A. Ananthalakshmi; Editing by Richard Pullin and Tom Hogue)