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PRECIOUS-Gold rises as dollar dips, looming U.S. rate hike limits gains

* Gold little changed for the month

* Silver falls after hitting one-month high on Tuesday

* Palladium on track for first monthly loss this year

(Updates prices, milestones, dollar move, adds comments, NEW YORK dateline) NEW YORK/LONDON, May 31 (Reuters) - Gold prices rose on Wednesday as the dollar dipped and simmering geopolitical tensions lent support, though the metal was little changed for the month amid an increased chance of a U.S. interest rate rise next month.

The dollar edged lower versus a currency basket amid

growing political tension in Washington. Sterling recovered after a poll showed Britain's ruling Conservatives still leading ahead of elections next week. A previous projection indicated a hung parliament. The greenback's losses, however, were limited by U.S. economic data this week that supported the case for a Federal Reserve interest rate hike next month. U.S. economic data on Wednesday was mixed. Investors are keenly awaiting Friday's U.S. non-farm payrolls report, which could set the dollar's tone in the short term. "While electoral uncertainty in Europe and political bickering in the US buoyed gold prices in Q2 2017, we continue to forecast lower gold prices going forward," Societe Generale analysts said in a note. "Fed tightening this year and in 2018 - whether in the form of higher interest rates or balance sheet deleveraging - will inevitably dent investors' appetite for gold." The bank forecast gold prices to average $1,200 per ounce in the fourth quarter and recommended selling gold price rallies. Higher rates reduce demand for non-interest bearing bullion and boost the U.S. currency, making dollar-priced gold costlier for non-U.S. investors.

Spot gold rose 0.7 percent to $1,271.14 per ounce by

2:49 p.m. EDT (1849 GMT). It closed 0.3 percent lower on Tuesday after rising to a one-month high of $1,270.47. For the month, bullion is up about 0.2 percent.

U.S. gold futures was up 0.6 percent at $1,270.30.

Traders see an 86.6 percent chance of a 25-basis-point rate hike at the Fed's June 13-14 policy meeting, Thomson Reuters data shows. But some market participants said signs of softness in some economic data have raised questions about whether the U.S. central bank can keep to its plan to hike interest rates two more times this year and begin shrinking its balance sheet. The investigations into alleged Russian meddling in the 2016 U.S. election and Moscow's possible collusion with members of Donald Trump's campaign also have clouded the prospect of a rate hike next month. Investors fear the probes could hamper the Trump administration's push for tax cuts and other stimulus measures.

In other trading of precious metals, silver slipped

0.3 percent to $17.31 an ounce, though it was 0.8 percent higher for the month.

Platinum was up 1.2 percent at $945.3 an ounce after

falling 1.9 percent in the previous session in its biggest one-day percentage loss in nearly a month. The metal was set for its first monthly drop this year.

Palladium was up 1.4 percent at $816.45 an ounce and

was about 0.3 percent higher for the month.

(Additional reporting by Vijaykumar Vedala in Bengaluru; Editing by Paul Simao and Chizu Nomiyama)