By Devika Krishna Kumar and Clara Denina
NEW YORK/LONDON (Reuters) - Gold prices rose nearly 2 percent on Tuesday, the biggest percentage gain since June, as disappointing U.S. economic data reinforced speculation in the market that the Federal Reserve will not raise interest rates at its September policy meeting.
The U.S. non-manufacturing new orders index for August fell to its lowest since December 2013.
Spot gold rose for a fourth straight day to a session high of $1,351.84 an ounce, a rise of 1.9 percent - its biggest gain since June 24.
Prices were up 1.73 percent at $1,349.29 per ounce by 2:20 p.m. EDT (1820 GMT). U.S. gold futures ended the session 2 percent higher at $1354.0.
The metal hit a two-month low of $1,301.91 last Thursday on prospects that a strong non-farm payrolls report for August could put the Fed on track to raise rates soon. Gold bounced back, however, when the data missed expectations.
"The combination of weaker economic data over the past week has certainly turned the precious metals market to the upside," David Meger, director of metals trading for High Ridge Futures in Chicago.
"I believe this is a move that has the benefit of continuing now that the market does not have to wrangle with the idea of a rate hike anytime remotely soon"
Gold is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding the non-yielding asset while boosting the dollar, in which the metal is priced.
The dollar index tumbled more than 1 percent on Tuesday.
New U.S. data releases and any comments from Federal Reserve officials will be watched closely for hints as to the timing of any rate increases.
Forecasting a 25-basis-point rate hike by the Fed in December, ABN Amro analyst Georgette Boele said that modest growth and above-growth inflation should be supportive of gold going into 2017.
ABN Amro on Tuesday revised its gold and silver price forecasts for the year.
Spot silver touched a more than three-week high of $20.13 an ounce.
The path of least resistance is once again to the upside for both gold and silver, Fawad Razaqzada, market analyst for forex.com said.
"The metals have started this week on the front foot and gold is now above short-term resistance at $1,330 and silver is above the $19.25/45 area."
South Africa's biggest platinum mine workers' union and the industry have failed to reach a deal on pay, the union said on Monday, raising the prospect of industrial action in the world's top producer of the white metal.
Platinum outperformed the rest of the complex, rising as much as 3.2 percent to a near two-week high of $1,103.40 an ounce. Palladium rose 2.7 percent to $696.72.
(Additional reporting by Nallur Sethuraman in Bengaluru and Jan Harvey in London; Editing by Susan Fenton and Andrew Hay)
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