PRECIOUS-Gold rises as dollar dips from near 6-month high

    * Dollar fails to increase after strong U.S. data
    * Palladium off six-week highs hit on Monday

 (New throughout, updates prices, market activity and comments;
adds second byline and NEW YORK dateline)
    By Renita D. Young and Maytaal Angel
    NEW YORK/LONDON, June 5 (Reuters) - Gold prices increased on
Tuesday as the dollar retreated slightly from close to a
six-month high even as strong U.S. economic data sealed the case
for the U.S. Federal Reserve to increase interest rates. 
    U.S. services sector activity accelerated in May, pointing
to robust economic growth in the second quarter.
            Other data showed job openings rising to a record
high in April, far outpacing hiring.
    The Institute for Supply Management's non-manufacturing
activity index jumped 1.8 points to 58.6, ending three straight
monthly declines. The reading indicates expansion in the sector,
which accounts for more than two-thirds of U.S. economic
    Strong growth and tightening labor market conditions should
guarantee that the Fed will hike interest rates next week, and
boosts chances for two more hikes later in the year.
    Still, the U.S. dollar, in which gold is priced, declined
against a basket of currencies, making gold more attractive to
    Spot gold        gained 0.5 percent at $1,298.45 per ounce
by 1:32 p.m. EDT (1732 GMT).
    U.S. gold futures         for August delivery settled up
$4.90, or 0.4 percent, at $1,302.20 per ounce. 
    "The dollar could not find support from the data because it 
had been in a strong uptrend recently in anticipation of
improving data and speculators are taking profit on those long
dollar positions ahead of the Fed meeting next week," said's Fawad Razaqzada. 
    "What really matters is how (the data) will impact the
thinking and action of the Fed. Most people are therefore
waiting to hear from the central bank itself with the decision
now in just over a week."
    Expectations of higher interest rates tend to boost the
dollar and reduce investor interest in non-yielding bullion. 
    U.S. stocks rose to a record intra-day high, spurred by a
new all-time peak for Apple, a 17-year top for European tech
firms and news that Twitter was set to join Wall Street's
flagship S&P 500 index.                  
    Rising equities typically signal strong investor risk
appetite, weighing on gold, seen as a safe haven asset.
    Meanwhile, silver        rose 1 percent at $16.52 an ounce. 
    Platinum        lost 0.5 percent at $896.25 an ounce. It
earlier hit a low of $888, the lowest since May 21.
    Palladium        dropped 0.1 percent at $992 per ounce after
hitting a six-week high of $1,010.50 the previous session.

 (Additional reporting by Karen Rodrigues and Swati Verma in
Bengaluru; editing by Alexander Smith and David Gregorio)