Gold holds near three-month high on U.S. rate expectations

SINGAPORE (Reuters) - Gold retained gains from a five-day rally on Tuesday, trading near a three-month high as a recent string of sluggish U.S. economic data stoked speculation the Federal Reserve would not raise rates any time soon.

Spot gold had dipped slightly to $1,223.39 an ounce by 0030 GMT, but held near a three-month high of $1,232.20 reached in the previous session.

The metal had gained for five straight days to Monday after recent data on U.S. jobs market, retail sales and consumer sentiment pointed to weakness in the economy.

The weak data bolstered views the economy was not recovering strongly enough for the U.S. central bank to raise rates from record lows at its next policy meeting in June.

That view has supported non-interest-paying bullion, which would have seen demand decline with higher rates.

However, Chicago Fed President Charles Evans noted that the Fed could look at a rate hike in June if the economy was strong enough.

The U.S. economy is probably not as weak as current estimates suggest, a paper published Monday by the Federal Reserve Bank of San Francisco said, potentially adding to arguments for raising interest rates sooner rather than later.

The U.S. dollar made broad-based gains on Monday, recovering ground after several weeks of selling that had brought the greenback down to more attractive levels after prolonged strength.Further strengthening of the greenback could hurt gold, seen as a safe-haven asset.

SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.78 percent to 718.24 tonnes on Monday.

MARKET NEWS

Wall Street stocks rose on Monday to record highs on hopes the Federal Reserve will hold off raising interest rates, while the dollar rallied and Greek bond yields jumped on worries the nation will not be able to make its debt payments.

(Reporting by A. Ananthalakshmi; Editing by Joseph Radford)