By Vijaykumar Vedala



May 16 (Reuters) - Gold prices rose for a fourth day on Tuesday as the dollar eased on signs of slower economic activity in the United States that dented expectations of an aggressive string of interest rate hikes by the U.S. Federal Reserve.



The New York Federal Reserve bank said on Monday its Empire State Manufacturing Activity index, a report on business activity in the state, unexpectedly fell in May, sinking into negative territory for the first time since October. The weaker-than-expected report could be a harbinger a possible deterioration in the U.S. manufacturing sector.            



Spot gold gained 0.3 percent at $1,233 per ounce at 0403 GMT. On Monday, it touched its highest since May 4 at $1,237.26.



U.S. gold futures were up 0.3 percent at $1,233.60 an ounce. 



"In the shorter term it (weaker U.S. data) could lift gold prices to a certain extent as it ensures the pace of the interest rate hikes do not accelerate," said Mark To, head of research at Hong Kong's Wing Fung Financial Group.



Expectations of a U.S. rate increase in June fell to 74 percent compared to 84 percent last week, according to the CME Fedwatch.



Higher interest rates tend to boost the dollar and push bond yields up, putting pressure on gold prices by increasing the opportunity cost of holding non-yielding bullion.



Risk aversion sentiment due to recent global developments including the North Korean missile test, the massive "ransomware" cyber attack and controversies surrounding U.S. President Donald Trump could lift gold prices over the next two weeks, Wing Fung's To added.                                   



Gold is used as an alternative investment during times of political and financial uncertainty.



Spot gold may rise more to $1,245 per ounce, as it has cleared a resistance at $1,233, according to Reuters technical analyst Wang Tao.            



Paulson & Co held its stake steady in the world's biggest gold exchange-traded fund while Soros Fund Management stayed out of the precious metal in the first quarter of 2017, when bullion prices rallied to 3-1/2-month highs, a filing showed on Monday.           
In the wider markets, the dollar index traded near a one-week low versus a basket of major currencies on Tuesday.  



Among other precious metals, silver rose 0.6 percent at $16.69 an ounce.



"Although there is increasing evidence of a bottom being formed in both gold and silver, we would like to see a bit more "staying power" before choosing to engage more aggressively on the long side," INTL FCStone analyst Edward Meir said.



Platinum held near the two-week highs hit on Monday and was up 0.1 percent at $928.53 per ounce.



Producers, fabricators and traders have gathered for the Platinum Week in London.                                    



Palladium inched 0.1 percent lower to $795.93 an ounce.



(Reporting by Vijaykumar Vedala in Bengaluru; Editing by Joseph Radford and Christian Schmollinger)

© Reuters News 2017