* September Fed policy meeting minutes due on Wed
* GRAPHIC-2016 asset returns: http://reut.rs/1WAiOSC (Updates prices, adds comment)
By Clara Denina
LONDON, Oct 11 (Reuters) - Gold prices fell on Tuesday as the dollar strengthened on increasing bets that the Federal Reserve will raise U.S. interest rates in December.
Chicago Fed President Charles Evans, speaking in Sydney on Tuesday, said he "could be fine" with raising U.S. interest rates in December, but that he would prefer to see how the economy and inflation progressed before deciding. have priced in a 70 percent chance that the Fed will raise rates at a Dec. 13-14 meeting, up from 66 percent early on Friday, according to CME Group's FedWatch tool.
Spot gold XAU= had dropped 0.3 percent to $1,256.05 an ounce by 1310 GMT. U.S. gold futures GCcv1 fell 0.2 percent to $1,257.60 an ounce.
"A stronger dollar is weighing on most commodities and there is the outlook for the Fed potentially raising rates in December, which is damaging for gold," ING commodity strategist Warren Patterson said.
Bullion touched a four-month low of $1,241.20 an ounce on Friday and registered its biggest weekly drop for 11 months, down 4.5 percent, after forecast-beating U.S. data and comments from Fed officials saying there was a strong case for raising rates.
"Funds have been quite reluctant to let go of the longs, but once the $1,300 level was broken, the flood gates just opened," Saxo Bank senior manager Ole Hansen said.
The dollar hit an 11-week high against a basket of six major currencies, making dollar-denominated gold more expensive for holders of other currencies. FRX/
Investors are also waiting for Wednesday's release of minutes of the latest Federal Reserve Open Market Committee meeting to see how close the central bank was to hiking rates last month.
Gold is highly sensitive to increases in U.S. interest rates, which can lift the opportunity cost of holding non-interest-bearing gold.
Among other precious metals, silver XAG= was down 0.7 percent at $17.51 an ounce.
Platinum XPT= was 0.3 percent lower at $957.40 an ounce and palladium XPD= fell 1.5 percent to $655.30.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ GRAPHIC-2016 asset returns
http://reut.rs/1WAiOSC
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Addional reporting by Swati Verma in Bengaluru; editing by Alexandra Hudson and Adrian Croft)