PRECIOUS-Gold set for 1st monthly gain in 4 on Trump tariff threat, Fed cut hopes

* Spot gold has risen 0.9% so far this month
* Platinum heading for biggest monthly loss since Nov. 2015
* Silver on track for fourth straight monthly loss

(Updates prices)
By Arijit Bose
May 31 (Reuters) - Gold prices rose on Friday, heading
towards their first monthly gain since January on increased
safe-haven demand, after U.S. President Donald Trump vowed to
levy tariffs on all imports from Mexico, ratcheting up concerns
of a global economic slowdown.
The new threat of tariffs on Mexico, coupled with a string
of soggy economic data from the United States this month and the
long-drawn Sino-U.S. trade war, also translated into increased
bets that the U.S. Federal Reserve could cut interest rates this
year.
Spot gold XAU= was up 0.5% at $1,294.72 per ounce at 0711
GMT. It has risen about 0.9% so far this month.
The metal is also on track for a second consecutive weekly
gain, up about 0.8% over the week.
U.S. gold futures GCcv1 rose 0.6% to $1,294.70 an ounce.
An infuriated Trump on Thursday vowed to impose a tariff on
all goods coming from Mexico starting at 5% and ratcheting
higher until the flow of illegal immigrants into the United
States ceases. Asian shares and sovereign bonds sank on the news as
investors feared the move risked tipping the United States, and
maybe the whole world, into recession. MKTS/GLOB
"Donald Trump's (threat) about U.S. tariffs on Mexico,
sparked some fears in the market. And if the whole U.S. and
China negotiation is any example this can drag much longer,"
said David Song, an analyst at DailyFX.
"With this kind of push from the Trump administration we
will see whether or not the Fed will continue to have that
flexibility to retain its wait and see approach," Song added.
Lower interest rates would support gold since it reduces the
opportunity cost of holding the non-yielding asset.
Overnight, data showed that U.S. inflation was much weaker
than initially thought in the first quarter amid a sharp
slowdown in domestic demand, which could cast doubts on the
Fed's view that the benign price pressures were largely because
of temporary factors. However, "over the near term, a strong dollar will weigh
down on commodities in general," said Heng Koon How, head of
markets strategy, United Overseas Bank.
"But our long term view is that gold will recover to $1,450
an ounce by middle of 2020 as safe haven in-flows and portfolio
diversification needs increase to gold's advantage."
The dollar index .DXY was on track for a 0.5% gain this
week supported by weakness in peers such as the euro and
sterling, and the U.S. currency's own status as a safe-haven in
times of market and economic troubles. FRX/
Elsewhere, silver XAG= edged 0.1% higher to $14.54 per
ounce but was heading for its fourth straight monthly loss.
Platinum XPT= was steady at $791.36 per ounce, having
fallen to its lowest level since Feb. 15 at $784.42 in the
previous session. The metal was on track for its biggest monthly
loss since Nov. 2015, down 10.7% so far.
Palladium XPD= fell 0.3% to $1,363.26 per ounce, not far
away from a peak since May 1 at $1,380.75 it touched in the
previous session.