PRECIOUS-Gold prices edge down as dollar rebound counters rate-cut optimism

(In last paragraph, corrects to say palladium on Monday hit lowest levels since July 2017 and not August 2018)

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Fed policymakers signal rate cuts ahead, but not recession

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Palladium dropped to multi-year low on Monday

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US service sector rebounds in July

By Daksh Grover and Ashitha Shivaprasad

Aug 6 (Reuters) - Gold prices inched lower on Tuesday, pressured by a stronger dollar, while comments from Federal Reserve officials reinforcing expectations of bigger U.S. interest rate cuts later this year limited downward pressure.

Spot gold was down 0.2% to $2,403.22 per ounce as of 0644 GMT. Bullion fell to its lowest since July 26 in the previous session, caught in a global sell-off driven by fears of a U.S. recession.

U.S. gold futures edged 0.02% lower to $2,443.80.

The U.S. dollar rose about 0.3% against its rivals, while the benchmark 10-year Treasury yields also rose, putting pressure on the bullion.

"If upcoming economic data out of the U.S. comes out significantly weaker and the Fed becomes even more dovish, gold will move towards the $2,500 or beyond that," said ANZ commodity strategist Soni Kumari.

Traders will also be looking at data from top consumer China and with geopolitical tensions still running in the background, safe-haven demand should continue, she added.

U.S. central bank policymakers pushed back against the notion that weaker-than-expected July jobs data means the economy is in a recessionary freefall, but also warned that the Fed will need to cut rates to avoid such an outcome.

Traders are now anticipating 110 basis points (bps) of easing this year from the Fed, with a 50 bps cut in September priced in at a more than 70% chance.

Lower rates put pressure on the dollar and bond yields, while increasing the appeal of non-yielding bullion.

Meanwhile, Japanese stocks opened higher, underpinning a recovery across battered Asian share markets and even triggering circuit breakers in some.

Data on Monday showed that the U.S. services sector activity rebounded from a four-year low in July amid a rise in orders and employment.

Spot silver fell 1.5% to $26.87 per ounce.

Platinum was up 1.2% to $917.40, while palladium declined by 0.32% to $846.98 after hitting its lowest levels since July 2017 on Monday.

(Reporting by Daksh Grover and Ashitha Shivaprasad in Bengaluru; Editing by Sherry Jacob-Phillips, Varun H K and Janane Venkatraman)