PRECIOUS-Gold steadies after decline linked to hawkish Fed, strong dollar

* Spot gold may fall to $1,303/oz - technicals

* Dollar index rises to highest since Feb. 9

* Fed's Powell strikes hawkish tone

(Updates prices) LONDON, Feb 28 (Reuters) - Gold prices steadied on Wednesday after falling more than 1 percent in the previous session, following comments by Federal Reserve Chairman Jerome Powell that suggested the Fed might raise interest rates four times this year, not three. The dollar hit a five-week high versus a basket of other major currencies, with investors still bullish after Powell noted rising inflation and vowed to prevent the economy from overheating. A strong dollar makes dollar-priced gold costlier for investors using other currencies.

Spot gold was flat at $1,318.36 an ounce by 1551 GMT.

It closed 1.1 percent lower on Tuesday after hitting the lowest since Feb. 9 at $1,313.26.

U.S. gold futures were up 0.1 percent at $1,319.30.

"In the short term, we're bearish gold. Our forecast is for an average of $1,300 for the first quarter. The worst scenario for gold is a rising dollar and rising yield," Macquarie analyst Matthew Turner said. The dollar has strengthened from the three-year lows it reached on Feb. 16, with investors viewing the currency as oversold and as U.S. Treasury yields again approach recent four-year highs. World stocks tumbled as dismal Chinese and Japanese manufacturing and industrial output data added to the bearish

equities sentiment sparked by Powell's testimony .

"Longer-term, we see upside potential for gold coming from increased U.S. inflation and any renewed volatility in equity markets," said Evan Metcalf, director of portfolio management and head of operations at ETF Securities. Powell noted in his speech that recent data had strengthened

his confidence in inflation .

Inflation generally supports gold, which is considered a safe store of value when price pressures rise. But raising interest rates to fight inflation makes the non-yielding metal less attractive. Spot gold is expected to break support at $1,317 per ounce and fall to the next support level at $1,303, as suggested by its wave pattern and a projection analysis, Reuters technical analyst Wang Tao said. "People are looking to buy gold on dips, so I think it will be supported down at $1,300," a Hong Kong-based trader said.

Silver was up 0.2 percent at $16.46 an ounce. Palladium was up 0.6 percent at $1,041.10. Platinum

was flat at $983.20 per ounce, after dropping to a two-week low of $972.50.

(Additional reporting by Eileen Soreng and Nithin Prasad, editing by Larry King Editing by Dale Hudson and Mark Potter)