Gold slips on firm dollar, U.S. rate hike prospects

By Marcy Nicholson and Clara Denina

NEW YORK/LONDON (Reuters) - Gold dropped for a fourth session in five on Monday, as the dollar firmed after fresh comments from Federal Reserve officials that the central bank could look at raising U.S. interest rates soon.

Fed official Jeffrey Lacker on Friday repeated his call for the U.S. central bank to consider raising rates in June and said there is no shame in adjusting them lower again if economic data demands it.

Separately, San Francisco Fed President John Williams told Reuters that as the U.S. job market improves, the risk of an unexpected setback derailing the recovery once the Fed raises rates is receding.

"Our economists think that a June rate hike, while possible, is unlikely," said Barclay's in a note.

"However, the gold market came under pressure with June not having been ruled out."

Spot gold slipped almost 1 percent to a session low of $1,196.23 an ounce, before reclaiming some lost ground to $1,199.32, down 0.7 percent, by 2:08 p.m. EDT (1808 GMT). U.S. gold settled down $5.30, or 0.4 percent, at $1,199.30 an ounce.

"The fact that we are stuck at around $1,200 an ounce is to do with what U.S. interest rates are doing ...it's just a matter of time until former lows around $1,140 are broken," ABN Amro commodity analyst Georgette Boele said.

Investors tend to shun gold, which does not pay interest, when market expectations point to U.S. interest rates rising.

"Gold remains hostage to broader macro forces; the backdrop this year has been the timing of the Fed rate hike and underperformance of emerging markets," Macquarie analyst Matthew Turner said.

The U.S. dollar was firm against a basket of currencies [USD/]

China's exports shrank 15 percent in March while import shipments fell at their sharpest rate since the 2009 financial crisis, deepening concern about growth in the world's No.2 economy.

Demand in China remained tepid with premiums on physical gold on the Shanghai Gold Exchange at $1-$2 an ounce over the global spot benchmark on Monday from a small discount late on Friday.

Spot silver fell 0.9 percent to $16.28 an ounce, while platinum lost 1.7 percent to $1,150.24 an ounce and palladium fell 1.1 percent to $765.72 an ounce.

(Additional reporting by Manolo Serapio Jr in Singapore; Editing by David Goodman, Susan Thomas and Andrew Hay)