PRECIOUS-Gold heads for first monthly drop since Dec as Fed rate hike likely

    * Palladium heads for first monthly decline since December
    * Spot gold may break support at $1,257 per ounce -
    * Silver falls after hitting one-month high on Tuesday

 (Updates prices, adds quote)
    By Vijaykumar Vedala
    May 31 (Reuters) - Gold held steady on Wednesday but was set
for its first monthly drop since December as U.S. economic data
boosted the case for an interest rate hike by the Federal
Reserve next month.  
    U.S. consumer spending recorded its biggest increase in four
months in April and monthly inflation rebounded, pointing to
improving domestic demand that could allow the Fed to raise
interest rates next month.             
    Spot gold        was almost flat at $1,262.90 per ounce at
0757 GMT after slipping earlier in the day. It closed 0.3
percent lower on Tuesday after rising to a one-month high of
$1,270.47. For the month, bullion is down 0.4 percent.
    U.S. gold futures         were unchanged at $1,261.80.
    "Gold moved in a pretty tight range... Traders are waiting
on the sidelines ahead of the U.S. employment and non-farm
payroll data due on Friday," said Luke Chua, chief operating
officer at BullionStar Singapore.
    A U.S. rate hike is probably coming soon though the Federal
Reserve may want to delay if inflation remains soft, Fed
governor Lael Brainard said on Tuesday.              
    Interest rate futures on Tuesday indicated a nearly 89
percent chance of a June hike, according to CME Group's FedWatch
    Higher rates would reduce the demand for non-interest
bearing bullion as well as boosting the U.S. dollar in which
gold is priced. 
    Political tensions in the United States and Europe continue
to support gold and have prevented any major losses for the
metal, said Yuichi Ikemizu, Tokyo branch manager at ICBC
Standard Bank.
    British Prime Minister Theresa May could lose control of
parliament in June 8 election, according to a projection by
polling company YouGov.             
    In Italy, the 5-Star Movement voted over the weekend in
favour of a proportional electoral system, raising the chances
of an unprecedented autumn parliamentary election.             
    Spot gold        may break a support at $1,257 per ounce and
fall to the next support at $1,245, according to Reuters
technical analyst Wang Tao.             
    "The extended short term long positioning and a lack of
upside momentum may be signalling that a correction lower may be
on the cards," said Jeffrey Halley, a senior market analyst at
    In other precious metals, silver        slipped 0.3 percent
to $17.32 an ounce though it was up 0.6 percent for the month. 
    Platinum        was up 0.9 percent at $942.60 an ounce after
falling 1.9 percent in the previous session in its biggest
one-day percentage loss in nearly a month.  
    Palladium        was up 0.5 percent at $808.65 an ounce and
was on track for a monthly decline of 2 percent, its first
monthly decline this year.

 (Reporting by Vijaykumar Vedala in Bengaluru; Editing by
Christian Schmollinger and Subhranshu Sahu)