* Dollar index touches seven-week high
* Data shows U.S. jobless claims declined
* GRAPHIC-2016 asset returns: http://reut.rs/1WAiOSC (Updates prices, adds comment)
By Jan Harvey
LONDON, May 19 (Reuters) - Gold slid more than 1 percent to a three-week low on Thursday, extending the previous day's decline, after minutes from the Federal Reserve's April policy meeting signalled that it could raise U.S. interest rates as soon as next month.
Downward pressure increased after U.S. data showed the number of Americans filing for unemployment aid fell last week, the latest sign that the economy was regaining speed after stumbling in the first quarter. That lifted the dollar. FRX/
Spot gold XAU= was down 0.9 percent at $1,246.61 an ounce at 1355 GMT, off an earlier low of $1,244.00 an ounce, its weakest since April 28. It fell 1.7 percent on Wednesday.
The latest Fed minutes indicated that the U.S. central bank is likely to raise rates if economic data points to stronger second-quarter growth as well as firming inflation and employment. was no hint for near-term rate hikes in the accompanying statement after the April meeting," Commerzbank (DE:CBKG) analyst Carsten Fritsch said. "Hence, this sharp market reaction after yesterday's minutes."
"All commodities are getting hammered -- silver is down 3 percent, oil down more than 2 percent," he said. "It seems that a lot of speculative investments are being unwound, with the stronger U.S. dollar as excuse."
Gold is highly sensitive to interest rate hikes, which increase the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced.
The metal has risen nearly 20 percent this year on speculation that the Fed will hold off from further increases on concerns over volatility in global markets. Messages from the bank on the issue have been mixed.
Fed Vice Chairman Stanley Fischer said on Thursday the United States requires faster potential economic growth in order to lift the long-run equilibrium interest rate. That pulled the dollar from earlier highs, though it remained up. world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares GLD , said its holdings were unchanged on Wednesday. The fund has had inflows of more than 50 tonnes so far this month. GOL/ETF
Appetite for gold overnight in Asia, home of the world's biggest bullion markets, was soft despite Wednesday's price drop.
"Bargain-hunting kept gold buoyant during early Asian trade today. However, weakness soon returned," MKS said in a note. "Muted interest in China at an onshore premium around $2.50 did little to support prices."
U.S. gold futures GCv1 for June delivery were down 2 percent at $1,247.50
Among other precious metals, silver XAG= was down 3.1 percent at $16.33 an ounce, platinum XPT= was down 1.5 percent to $1,008.60 and palladium XPD= was down 1.6 percent at $561.40.
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