Gold fell on Tuesday from a four-week high hit in the previous session, while palladium flirted with $500 an ounce as a firmer U.S. dollar kept the metal just below Monday's two-year high. Tokyo dealers noted buying by local autocatalyst makers but the volume was small and there was an absence of interest from consumers outside Japan. Investors also waited for minutes of the U.S. Federal Reserve's policy setting body's meeting in March, which could offer clues on the direction of interest rates. Spot gold [XAU= 1128.2 -1.50 (-0.13%) ] was at $1,128.10 an ounce by 0329 GMT, down $1.60 from New York's notional close on Monday, when it hit an intraday high of $1,133.20, its strongest level since March 8. Palladium [XPD=X 498.75 -1.25 (-0.25%) ] hit an intraday high of $500, just below Monday's 2-year high of $500.50, before slipping to $499.75, down 25 cents. Sister metal platinum [XPT=X 1689.0 -16.50 (-0.97%) ] also fell after rallying to its highest since August 2008 at $1,705.50 in the previous session. "Actually, we don't see too much selling but I guess the price has gone up too fast this morning when the liquidity is small," said a physical dealer in Tokyo. "We've also seen some buying from the industrial sector in Japan but there are no inquiries from overseas buyers," he added. Physical dealers said some auto makers had shifted to using more palladium in diesel and gasoline engines because the price was much cheaper than platinum, while hopes for a further recovery in the global auto sector also boosted demand. Palladium and platinum ended the first quarter 17% and 12% higher respectively, surpassing the single-digit gains posted by gold and silver. Inflows into U.S. platinum and palladium exchange traded funds and optimism about the global economic recovery have also ignited bying of the underlying platinum group metals, which are used in the auto industry for catalytic converters and also in jewellery. U.S. gold futures for June delivery fell $2.5 an ounce to $1,131.3. "There's a bit of selling on the physical side but there's early buying also from India," said a dealer in Singapore, referring to demand from the world's largest consumer ahead of the wedding season this month. "But volume is very small. I guess we are just watching currencies now," he added. The dollar steadied near 7-month highs against the yen on Tuesday, underpinned by a surge in U.S. Treasury yields, while the euro edged lower to $1.3470. U.S. data showing the economy's vast services sector grew last month at its fastest pace since mid-2006 added to optimism sparked by Friday's payrolls report, which showed employers added jobs in March at the fastest clip in three years. All this is likely to add to the markets' view that the Federal Reserve will raise rate before its counterpart in Japan. The world's largest gold-backed exchange-traded fund, SPDR Gold Trust [GLD 110.89 0.63 (+0.57%) ], said its holdings stood at 1,129.823 tons as of April 5, unchanged from the previous business day.

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