Gold snaps three-day losing streak but U.S. rate worries remain

By A. Ananthalakshmi

SINGAPORE (Reuters) - Gold edged up on Monday after three days of losses, but the metal wasn't too far from a six-week low as investors continued to speculate on when the Federal Reserve might raise U.S. interest rates.

Spot gold ticked up 0.4 percent to $1,183.08 an ounce by 0704 GMT, up from a six-week low of $1,170.20 reached on Friday.

Bullion suffered sharp losses last week after the Fed said it saw the recent slowdown in the U.S. economy as transitory and was not ruling out an interest rate rise this year.

Investors will be monitoring U.S. economic data due this week, including the nonfarm payrolls report for April due on Friday. Soft data could prompt the Fed to delay a rate rise, which would boost non-interest-paying gold.

"Gold has proven one time too many that it prefers to stick to $1,200 amid large fluctuations and I am inclined to believe that the precious metal may slowly edge back to that level just before Friday's nonfarm payrolls," said Howie Lee, an analyst at Phillip Futures.

However, others were a bit more cautious, citing weak chart readings.

Gold will trade in the $1,140-$1,225 range in May due to deteriorating technicals, despite softness in the dollar and sluggishness in the U.S. economy, said INTL FCStone analyst Edward Meir.

Recent U.S. economic figures have been mixed, with data on Friday showing a rise in consumer sentiment but weakness in manufacturing and construction.

The sluggishness in the economy has led many to believe the Fed won't tighten policy at its June meeting. They expect the U.S. central bank to wait until December before raising rates for the first time since 2006.

However, caution prevailed as two top U.S. central bankers said on Friday the Fed could still raise interest rates as soon as June if economic data strengthens as expected after a dismal first quarter.

In the physical markets, gold demand picked up after the metal's sharp losses last week.

Premiums on the Shanghai Gold Exchange, a physical platform in No. 2 consumer China, ticked up to $3-$4 on Monday from about $2 last week.

A survey on Monday showed China's factories suffered their biggest drop in activity in a year in April as new orders shrank.

Asian stocks bounced off lows as the weak data reinforced expectations that Beijing could roll out fresh support measures soon for the world's second-largest economy.

(Editing by Richard Pullin and Alan Raybould)