PRECIOUS-Gold dips, unable to sustain brief bounce up after Fed minutes

* GRAPHIC-2018 asset returns: http://tmsnrt.rs/2jvdmXl

(New throughout, updates prices, market activity and comments, adds second byline and NEW YORK dateline) NEW YORK/LONDON, Feb 21 (Reuters) - Gold dipped further on Wednesday, a day after its biggest daily slide in 2-1/2 months, but briefly bounced higher as the U.S. dollar slipped for a short time after the release of minutes from the U.S. Federal Reserve's January policy meeting. The Fed minutes were initially read as less hawkish than expected, which prompted the U.S. dollar index to turn negative against a basket of currencies for a awhile. "The minutes seemed to reveal a slightly more dovish Fed, which makes gold stronger and a softer dollar on the fear that deficits will take control rather than the Fed hiking rates," said Rob Haworth, senior investment strategist for US Bank Wealth Management.

Spot gold lost 0.4 percent at $1,324.16 per ounce by

3:03 p.m. EST (2003 GMT). It dropped as low as $1,322.70. U.S.

April gold futures settled up 90 cents, or 0.1 percent,

at $1,332.10 per ounce. Gold is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced. The minutes also gave direction on inflation signals, said George Gero, managing director of RBC Wealth Management. "Some Fed officials saw applicable risk (of) inflation to lag (the) target," he said. "Almost all Fed officials expected inflation to rise to (the) 2 percent goal." Inflation fears can boost gold's appeal as a store of value against inflation, unless investors believe interest-rate hikes will succeed in stopping inflation in its tracks. Gold prices have fallen more than 1 percent this week as the dollar bounced up off three-year lows. On Tuesday, bullion slid 1.3 percent, the most on any day since Dec. 7, as a rise in U.S. yields boosted the dollar and 10-year U.S. Treasury yields hovered near a four-year peak. On Wednesday, Treasury yields rose in choppy trading after the Fed minutes affirmed expectations of further rate hikes this year. Markets are now anticipating minutes from the European Central Bank on Thursday. Interest in physical gold has been muted this week during the Lunar New Year holiday across much of Asia, including major consumer China.

Among other precious metals, silver rose 1.5 percent

at $16.70 an ounce, up from a one-week low of $16.37, while

palladium dropped 0.8 percent at $1,025 per ounce and platinum lost 1 percent at $990.24, off a $988 low.

(Reporting by Renita D. Young in New York and Jan Harvey in LondonAdditional reporting by Eileen Soreng in BengaluruEditing