By Devika Krishna Kumar and Jan Harvey
NEW YORK/LONDON (Reuters) - Gold prices rose on Tuesday as the dollar slipped lower against a basket of currencies and concerns over the global economic outlook trumped some expectations that the U.S. Federal Reserve could raise interest rates this year.
Gold slipped to its lowest level in a week on Monday, under pressure after forecast-beating U.S. non-farm payrolls employment data on Friday revived speculation that the Fed could press ahead with a rate hike.
However, the precious metal quickly found support.
"There is still a view that we could see a rate hike this year but there are enough risk issues out there to justify holding gold," Citigroup analyst David Wilson said.
A weak report on U.S. productivity on Tuesday suggested the economy may not be growing as quickly as anticipated.
Spot gold > was up 0.4 percent at $1,340.47 an ounce by 2:57 p.m. EDT (1857 GMT), off an earlier low of $1,330.03, while U.S. gold futures
"If you look at the U.S. Treasury market, those yields are a bit lower, the dollar is off a little bit and then you have some selling off the highs in the S&P 500 ... making it a little bit more attractive to hold gold," said Mike Dragosits senior commodities strategist at TD Securities.
"On the technical charts as well, it's getting a little bit of a bounce," he added.
The rise for gold picked up momentum after it broke above a key chart level just below $1,335 an ounce, analysts said.
Against a basket of currencies, the dollar <.DXY> fell 0.3 percent after four days of gains while the S&P 500 and Nasdaq edged up to all-time highs before a decline in oil dulled the gains.
CME Group's Fed Watch tool showed traders see almost a 50-50 chance of a U.S. rate hike by December, compared with 30 percent before the payrolls data.
Gold is highly sensitive to rising U.S. interest rates, which lift the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which the metal is priced.
Fed policymaker Jerome Powell was quoted as saying on Monday that the U.S. economy is at increasing risk of becoming trapped in a prolonged phase of slow growth that points to a need for lower interest rates than previously expected.
Investment interest in gold-backed exchange-traded funds was less buoyant than in recent months. The largest, New York-listed SPDR Gold Shares
Among other precious metals, silver > was up 0.60 pct at $19.831 per ounce after touching a near two-week low on Monday. Platinum > was 0.6 percent higher at $1,155.6.
Palladium >, which earlier touched a two-week low at $683.53, was up 0.3 percent at $$692.22.
(Additional reporting by Zandi Shabalala in London and Nallur Sethuraman in Bengaluru; Editing by Greg Mahlich and Sandra Maler)
