Gold rises in choppy trading as shares climb, oil dips

SINGAPORE (Reuters) - Gold edged up on Tuesday in choppy trading amid strength in Asian equities and a drop in oil prices, although uncertainty over U.S. monetary policy kept investors cautious.

Crude futures slipped on Tuesday on a persistent global glut and the failure of a producer meeting at the weekend to rein in the ballooning oversupply, although a sharp drop in output in Kuwait due to an oil worker strike underpinned prices briefly.

Asian share markets rose to five-month highs on Tuesday, taking their cue from gains on Wall Street after the strike in Kuwait helped pull crude oil prices above their prior-session lows.

Spot gold was up nearly $1 at $1,232 an ounce by 0431 GMT, after earlier dropping as much as 0.3 percent.

"Gold is looking weak at the moment as there is some risk-on sentiment in the market and equities have rebounded," said a trader in Hong Kong, adding that prices could fall to $1,210.

More dovishness from the Federal Reserve will be key to pushing gold prices higher, he said.

Gold posted its best quarterly jump in nearly 30 years in the three months to March on expectations that the Fed will not be able to raise rates this year.

The Fed raised rates modestly from near zero in December, its first policy tightening in nearly a decade. While futures markets imply no further hikes until December, economists polled by Reuters see June as the most likely time for a second move. Fed projections imply about two more hikes before year end.

The Fed is set to hike interest rates more rapidly than investors currently expect, Boston Fed President Eric Rosengren said on Monday, pushing back on what he said was investors' too pessimistic view of the U.S. economy and monetary policy.

New York Fed President William Dudley said U.S. economic conditions are "mostly favourable", but the Fed remains cautious in raising interest rates because threats loom.

In other industry news, the world's top gold consumer China launched a yuan-denominated gold benchmark on Tuesday, as the country took an ambitious step to exert more control over the pricing of the metal and boost its influence in the global bullion market.

(Reporting by A. Ananthalakshmi; Editing by Joseph Radford and Richard Pullin)