By Jan Harvey
LONDON (Reuters) - Gold fell to a three-week low on Thursday, extending the previous day's slide, after minutes from the Federal Reserve's latest policy meeting signalled it could raise U.S. rates as soon as next month.
The minutes, from the Fed's April meeting, indicated that the U.S. central bank will likely raise interest rates in June if economic data points to stronger second-quarter growth as well as firming inflation and employment.
Gold is highly sensitive to interest rate hikes, which raise the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.
Spot gold was down 0.3 percent at $1,253.60 an ounce at 0932 GMT, while U.S. gold futures for June delivery were down $19.20 an ounce at $1,255.30. Spot prices fell 1.7 percent on Wednesday.
"The precious metal is under selling pressure as the odds for a June rate hike have surged," Naeem Aslam, chief market analyst at Think Forex, said. "Gold bears could not stay reticent, and they are taking advantage of this situation by pushing the price lower."
The dollar jumped to its highest since late March against a currency basket on Thursday, and was later up 0.2 percent against a currency basket.
Stock markets also fell, while Germany's benchmark 10-year Bund yield hit a two-week high on the talk of a U.S. hike in June.
Gold had risen nearly 20 percent this year on speculation that the Fed will hold off further rate increases on concerns over volatility in global markets.
Traders are now awaiting statements from Fed Vice Chairs William Dudley and Stanley Fischer later in the day for more clues on the Fed's thinking.
The world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares, said its holdings were unchanged on Wednesday. The fund has seen inflows of more than 50 tonnes so far this month.
Appetite for gold overnight in Asia, home of the world's biggest bullion markets, was soft despite Wednesday's price drop.
"Bargain hunting kept gold buoyant during early Asian trade today, however weakness soon returned to the market as the yellow metal tested the overnight low in afternoon trade," MKS said in a note.
"Muted interest in China at an onshore premium around $2.50 did little to support prices," it added.
Among other precious metals, silver was down 1.2 percent at $16.60 an ounce, while platinum was down 0.5 percent at $1,019 an ounce and palladium was down 0.1 percent at $570.24 an ounce.
Silver and palladium earlier touched one-month lows of $16.58 an ounce and $568.10 an ounce respectively.
(Additional reporting by Vijaykumar Vedala and Koustav Samanta in Bengaluru; Editing by Michael Perry and Ruth Pitchford)
