* Technicals weak, more price declines seen
* U.S. May payrolls rise by 280,000 vs est 225,000
* Fed’s Dudley says Fed could still raise rates in 2015 (Updates prices, adds comment)
By Marcy Nicholson and Clara Denina
NEW YORK/LONDON, June 5 (Reuters) - Gold hit an 11-week low on Friday, heading for a third straight weekly slide, as the dollar rallied after better-than-expected U.S. employment data bolstered prospects for an interest rate increase this year.
Non-farm payrolls increased 280,000 last month, the largest gain since December, above the 225,000 that economists polled by Reuters had expected.
Spot gold fell as much as 1.2 percent to its lowest since March 19 at $1,162.35 an ounce and was down 0.5 percent at $1,170.66 an ounce by 2:55 p.m. EDT (1855 GMT), heading for a 1.6 percent weekly fall, the third straight decline and the biggest since April 24.
U.S. gold futures for August delivery settled down $7.10 at $1,168.10 per ounce.
“The U.S. data triggered a break below important support levels of $1,175 and $1,170,” ActivTrades chief analyst Carlo Alberto de Casa said.
“The break lower caused the metal to exit that $1,170-$1,220 trading range in which it had been confined for many weeks, making it more vulnerable to further declines towards $1,150 and $1,131.”
Bill O’Neill, co-founder of commodities investment firm LOGIC Advisors in New Jersey, said $1,140 holds strong support.
“The market was vulnerable and looking defensive all week. We gradually were breaking support levels,” O’Neill said.
The dollar rose 1.5 percent versus a basket of currencies after the data, seen as a key barometer of the U.S. economy. A stronger greenback makes dollar-denominated gold more expensive for holders of other currencies, while higher interest rates would hit demand for the non-interest-paying metal.
Sluggish growth in the first quarter had left markets doubting whether the U.S. Federal Reserve would raise rates this year but strong data throughout the week could put the Fed back on track to increase rates as soon as September.
New York Fed President William Dudley said he still expects the Fed will be in position to raise rates later this year, but only if growth rebounds from a weak first half, and there is more progress on lowering the unemployment rate and other measures of labor market weakness.
Investors were also keeping an eye on Greece after it delayed a debt payment to the International Monetary Fund due on Friday.
Trading in physical markets was bleak and premiums in major trading centers across Asia have barely moved in the past few weeks.
Spot platinum fell 0.5 percent to $1,090 an ounce. Silver fell 0.1 percent to $16.04 an ounce, while palladium edged 0.3 percent lower to $750 an ounce. (Additional reporting by A. Ananthalakshmi in Singapore; Editing by David Evans and Tom Brown)