* Gold rises more than 1 pct as investors flee stocks * Dollar index falls 0.4 percent to two-week low * U.S. Q1 GDP data, weekly jobless claims at 1230 GMT (Updates throughout, changes dateline from SINGAPORE) By Clara Denina LONDON, May 30 (Reuters) - Gold rose by around one percent on Thursday as the dollar fell to a two-week low against a basket of major currencies yet downside risk remained due to rebounding equities. Improved U.S. data suggesting the Federal Reserve could decide to scale back the current monthly pace of $85 billion in asset purchases in the next few policy meetings was seen as a catalyst that could take bullion prices lower. Gold rallied as high as $1,410.51, its highest since May 22. It stood at $1,406.11 at 0951 GMT, up 1 percent. U.S. gold rose 1 percent to $1,405.10 an ounce. Traders said volumes could see wide swings due to the June-August contract rollover on Friday. The dollar index dropped 0.5 percent, mostly due to a stronger yen after Japanese equities took a tumble overnight. But European stocks reversed Wednesday's losses as euro zone data showed confidence in the bloc's economy improved more than anticipated in May. "The fall in equity markets in the past few days shows that there is perhaps some concern that these had moved up too quickly at a time when you also had everyone buying the dollar on expectations of U.S. recovery," SP Angel analyst Carole Ferguson said. "I think the reversal of that is what is obviously helping gold and prices could settle not far from here if the $1,400 level is sustained, which will depend on whether investors continue to buy into risk or not." In bond markets, U.S. 10-year Treasury yields retreated from 13-month highs reached earlier in the week. As gold has no interest rate, a fall in returns from U.S. bonds and other markets, at least for now, is seen as a positive sign. The market is turning its attention towards the release of U.S. GDP data for the first quarter and U.S. weekly jobless claims at 1230 GMT, as these could give more cues on the Fed's future decisions. "The bearish trend remains in place," ScotiaMocatta said in a note. "However, we are short-term neutral until this consolidation period is resolved ...the base of the consolidation is at the $1,339 low from May 20, resistance is at the top at $1,414, the high from May 22." PHYSICAL DEMAND For now, strong premiums for gold bars in Asia have indicated jewellers and retail investors are happy to buy bullion on dips. In Singapore, supply constraints have sent premiums to all time highs at $7 to spot London prices. Holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.9 tonnes to 1,013.15 tonnes on Wednesday, the first increase since May 9. Silver tracked gold's gains closely, rising to a one-week high of $22.80 an ounce. Platinum rose 0.7 percent to $1,462.99 an ounce and palladium gained 0.3 percent to $748.97 an ounce, having reached a near-two-month high of $760.97 on Tuesday. (Additional reporting by Lewa Pardomuan in Singapore; editing by Jason Neely)

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