Gold lingers near three-week lows on Fed rate views

By Koustav Samanta

BENGALURU (Reuters) - Gold was steady on Monday as the dollar eased and Asian stocks firmed, with the metal holding near three-week lows on growing expectations the U.S. Federal Reserve will hike interest rates as early as June.

Bullion has been under pressure since the Fed last week released the minutes of its April meeting, which showed officials believe the U.S. economy could be ready for another interest rate increase next month.

Echoing those sentiments, Eric Rosengren, president of the Federal Reserve Bank of Boston said on Friday that conditions for a rate increase are "on the verge of broadly being met".

Gold is sensitive to interest rates, gains in which raise the opportunity cost of holding non-yielding bullion.

Spot gold was down 0.1 percent at $1,250.60 per ounce at 0644 GMT, still close to $1,244 touched last week, the lowest since April 28. U.S. gold futures dipped 0.1 percent to $1,251.20.

The safe-haven asset found some support as the dollar fell versus the yen on Monday, dragged lower by sliding Tokyo stocks and data showing Japan logged a much larger-than-expected trade surplus in April. [USD/]

But the greenback remains close to its highest in nearly two months against a basket of major currencies reached last week, supported by the Fed's rate hike expectations.

"We see gold continuing to work lower over the course of the coming week, as an upward trending dollar should continue to weigh in on prices," said INTL FCStone analyst Edward Meir.

Asian shares rose on Monday after a solid session on Wall Street, with MSCI's broadest index of Asia-Pacific shares outside Japan climbing 0.5 percent.

Some market analysts believe that investors are still betting on a not-so-soon increase in U.S. interest rates, reflected in the continued support for gold-backed exchange traded funds.

"The Fed is unlikely to raise interest rates anytime soon since it is an election year. Maybe after elections, unless we have very strong U.S. economic data," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.

The U.S. presidential election is scheduled for November.

Holdings in the world's largest gold-backed ETF SPDR Gold Trust rose 1 percent to 869.26 tonnes on Friday, the highest since November 2013.

Among other precious metals, spot silver dropped 1 percent to $16.34 an ounce. Spot platinum inched down 0.4 percent to $1,013.74 per ounce and spot palladium fell 0.9 percent to $553.10 per ounce.

(Additional reporting by Vijaykumar Vedala in Bengaluru; Editing by Christian Schmollinger and Joseph Radford)