(Updates prices)
* Dollar index down, Asian stocks recover
* George Soros buys into SPDR fund for first time in 3 yrs
By Koustav Samanta and Vijaykumar Vedala
BENGALURU, May 17 (Reuters) - Gold prices edged up on Tuesday as the dollar weakened, but gains were capped as Asian shares recovered from two-month lows.
News of billionaire investor George Soros and other big funds buying the metal for the first time in years also supported prices.
Spot gold XAU= had risen 0.2 percent to $1,275.90 per ounce by 0642 GMT. U.S. gold futures GCcv1 were up 0.3 percent at $1,277.50.
"There is more of a positive tone to rhetoric on the gold price outlook that may affect prices, but eventually it is the U.S. dollar that is the key driver," said analyst Helen Lau of Argonaut Securities in Hong Kong.
An index of the dollar against a basket of six major currencies .DXY edged down about 0.2 percent on Tuesday. A weaker greenback makes dollar-denominated gold cheaper for holders of other currencies. USD/
However, gains were limited as Asian shares rose after a rebound in technology giant Apple (NASDAQ:AAPL) and stronger oil prices boosted Wall Street. MKTS/GLOB
"Investor flows into ETFs (exchange traded funds) remain pretty strong and that just shows any dips we are seeing in the gold market seem to be a relatively short, with investors taking the opportunity to hold on to their long positions," said analyst Daniel Hynes at ANZ in Sydney.
Assets of SPDR Gold Trust GLD , the world's top gold ETF, have been rising steadily this year and are at their highest since November 2013. GOL/ETF
U.S. regulatory filings on Monday showed that some influential investors bought into gold through ETFs in the first quarter. Soros, who once called gold "the ultimate bubble", bought 1.05 million shares in the SPDR gold fund, returning to bullion for the first time in three years.
Gold bull John Paulson, however, continued to slash bets on bullion. has rallied 20 percent this year on speculation that the U.S. Federal Reserve has slowed its expected pace of rate increases on concerns over the volatility in global markets.
The Fed should consider raising rates at its June meeting, Richmond Fed President Jeffrey Lacker told the Washington Post in an interview published on Monday, saying inflation was moving toward 2 percent and labour markets had tightened. other precious metals, spot silver XAG= rose 0.6 percent to $17.23 per ounce, while spot platinum XPT= was up 0.8 percent at $1,053.70 per ounce and spot palladium XPD= gained 0.6 percent to $593.11 an ounce.