* U.S. rate outlook lifts dollar to three-month highs
* Dollar strength briefly pushes gold down 4 percent
* European shares rise, reversing fall in Asia
* U.S. stock futures point to modestly higher open
By Nigel Stephenson and Sujata Rao
LONDON, July 20 (Reuters) - The dollar jumped to three-month highs on Monday, extending its recent gains as expectations of rising U.S. interest rates gathered pace, while gold prices plunged to their lowest in more than five years.
The greenback posted its best weekly performance in about two months last week, after Federal Reserve Chair Janet Yellen reiterated that U.S. interest rates will probably rise later in the year. Data on Friday showing a pickup in U.S. consumer prices and housing starts also helped the rally. ID:nN9N0ZU000 ID:nL2N0ZX0JV
The strength of the dollar weighed on gold, which plunged as much as 4 percent. Platinum fell as much as 5 percent to its lowest since February 2009.
Global equities held close to Friday's three-week highs .MIWD00000PUS and European shares approached seven-week peaks. Greece-related fears continued to recede as the country's banks reopened for the first time in three weeks after a deal to start talks on a new international bailout.
U.S. stock index futures ESc1 SPc1 pointed to a modestly higher open on Wall Street.
The dollar reached its highest since April 23 against a basket of major currencies .DXY and was last up 0.1 percent on the day.
The euro EUR= fell to its lowest since late May on the EBS trading platform but last traded up 0.1 percent at $1.0840. The yen JPY= dropped 0.1 percent to 124.20 to the dollar.
Gold dived, touching a five-year low as the U.S. interest rate outlook and its consequences for the dollar led sellers in China dumped the metal.
"The Asian market missed the action on Friday when U.S. players were already attempting a break of $1,130, a major support level, and has pushed prices much lower today," ABN Amro analyst Georgette Boele said.
"Last week was an important week: you got Yellen, a three-month high in the dollar and good U.S. economic data ... there is a chance that we see more downside in coming days."
Spot gold XAU= last traded at $1,112.30 an ounce, having fallen as far as $1,088.05, its weakest since March 2010.
The pan-European FTSEurofirst 300 .FTEU3 equity index rose 0.5 percent to its highest since late May. Amsterdam-listed chemicals company OCI OCI.AS rose 17 percent on merger talk. ID:nL5N1000RF Euro zone banks .SX7E rose 1.1 percent
In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS slipped 0.5 percent. Japan's stock market was closed for a holiday.
Yields on southern euro zone government bonds - those considered most vulnerable to the Greece crisis - fell on signs of a return to normality as investor appetite for riskier assets grew. Spanish ES10YT=TWEB and Italian IT10YT=TWEB 10-year yields both rose about 7 basis points, to 1.89 and 1.87 percent respectively.
German 10-year yields DE10YT=TWEB , which usually rise on increased appetite for risk, fell on the prospect of hefty redemptions and bond coupon payments by month-end.
Crude oil prices edged lower after posting their third consecutive weekly loss last week on expectations of increased oil exports from Iran after a deal to ease sanctions on Tehran.
Brent crude LCOc1 was last down 38 cents a barrel at $56.72 as lower Saudi exports and slower U.S. rig activity did little to ease concern about oversupply.