* Paulson cuts gold bets; Soros rushes back in
* U.S. reports largest inflation rise in three years
* Platinum/palladium ratio: link.reuters.com/fyg99v
(Adds Fed officials' comments, updates prices, adds quote)
By Devika Krishna Kumar and Clara Denina
NEW YORK/LONDON, May 17 (Reuters) - Gold prices rose on
Tuesday, reversing earlier losses after a weaker dollar and
falling stock markets spurred safe-haven buying of the precious
metal.
Spot gold was up 0.3 percent at $1,277 per ounce by
2:58 p.m. EDT (1858 GMT), while U.S. gold futures settled
up 0.2 percent at $1,276.9.
Profit-taking led to a drop in gold prices earlier in the
session, as stock markets temporarily edged higher.
European shares hit a two-week high, bolstered by a rally in
mining stocks, but eased later in the session. The dollar
slipped to trade 0.03 percent lower against a basket of six
major currencies, giving a boost to gold.
A weaker U.S. currency makes dollar-denominated gold cheaper
for holders of other currencies.
Gold has rallied 20 percent this year on speculation the Fed
has slowed its expected pace of rate increases on concerns about
global economic growth and the volatility of stock markets.
"Gold has been supported as of late as the ongoing theme
over the several sessions has been economic global concerns, and
that has been a driver behind that safe haven demand for gold,"
said David Meger, director of metals trading for High Ridge
Futures in Chicago.
But on Tuesday, two Fed officials said that the U.S. central
bank could raise short-term interest rates at its meeting next
month.
Dallas Federal Reserve Bank President Robert Kaplan said the
U.S. economy is strong enough to justify an interest-rate hike
in the "not too distant future," but increases will be very
gradual.
Gold gave up some of its gains in the wake of the comments.
"We're still trying to gauge the likelihood of a Fed rate
hike..the next portion of that decision is going to be seen from
the Fed minutes tomorrow," Meger said.
The U.S. government reported earlier on Tuesday that
consumer prices recorded their biggest increase in more than
three years in April as gasoline and rents rose, pointing to a
steady inflation build-up that is seen as giving the Fed
ammunition to raise interest rates later this year.
SOROS RETURNS
U.S. regulatory filings on Monday showed some influential
investors, including billionaire financier George Soros, bought
into gold through exchange-traded funds in the first quarter.
Soros, who once called gold "the ultimate bubble", returned
to the world's biggest gold exchanged-traded fund (ETF) after a
three-year absence, buying 1.05 million shares in SPDR Gold
Trust for about $123.5 million.
His move buoyed the gold market early in Tuesday's session.
SPDR Gold Trust's assets have been rising steadily this year
and are at their highest level since November 2013.
But long-time gold bull John Paulson cut his bets on
bullion.
Spot silver was up 0.5 percent at $17.21 per ounce,
spot platinum was up 0.6 percent at $1,051.23 per ounce
and spot palladium lost 1.5 percent to touch $580.91 an
ounce.
The platinum/palladium ratio has reached its highest point
in about a month this week, as it resumes a slow climb higher
after reaching its lowest level since 2002 in October.
An ounce of platinum now buys 1.78 ounces of palladium, up
from 1.64 ounces at the start of the year.
(Additional reporting by Koustav Samanta and Vijaykumar Vedala
in Bengaluru and Jan Harvey in London; Editing by David Clarke
and Paul Simao)