Gold rises from three-week low on soft U.S. dollar

By Chris Prentice and Clara Denina

NEW YORK/LONDON (Reuters) - Gold rose from a three-week low on Thursday, following its biggest drop in over a month on Wednesday, as the dollar retreated on weaker-than-expected U.S. economic data.

Spot gold was up 0.8 percent at $1,197.35 an ounce by 2:31 p.m. EDT (1831 GMT), after touching its lowest since April 1 at $1,183.65.

Commodities were broadly higher as oil touched its highest price this year. The bellwether Thomson Reuters/Core Commodity CRB index rose over 1 percent.

Gold fell 1.3 percent on Wednesday, its biggest daily decline since March 6, pressured by a stronger dollar after U.S. home resales surged to a 1-1/2-year high in March.

U.S. gold futures for June delivery settled up 0.6 percent at $1,194.30 an ounce.

Bullion's rebound from lows came as the dollar struggled for momentum after data showed new claims for jobless benefits rose last week for a third straight week.

Separately, growth in the U.S. manufacturing sector dipped more than expected in April, while home sales recorded their biggest drop in more than 1-1/2 years in March.

"We're reacting to the dollar's move (on) the lower-than-expected housing data," said Howard Wen, precious metals analyst at HSBC in New York.

Market focus was expected to shift to the Federal Reserve's policy meeting later this month, as traders look for stronger clues about the timing of an interest rate rise.

"(W)e are forecasting a June rate hike so they should make some more nods towards it this month," Macquarie analyst Matthew Turner said.

Markets were also watching the unfolding Greek debt crisis.

Greece can scrape together enough cash to meet its payment obligations into June, euro zone and Greek officials said on Wednesday, playing down fears of an imminent default even as hopes receded of a deal with creditors to release fresh aid.

Elsewhere, China's factory activity contracted at its fastest pace in a year in April, a private survey showed, suggesting economic conditions are still deteriorating.

Demand in top bullion consumer India was expected to return to subdued levels following the gold-buying festival of Akshaya Tritiya on Tuesday, Commerzbank said in a note.

Spot silver was up 0.8 percent at $15.90 an ounce, recouping most losses after hitting a one-month low on Wednesday. Platinum edged up 0.4 percent to $1,134.25 an ounce and palladium rose 2 percent to $768.75 an ounce.

(Additional reporting by A. Ananthalakshmi in Singapore; Editing by Dale Hudson and Mark Potter)