PRECIOUS-Gold falls as hawkish Fed bets lift dollar to one-year peak

* Gold market looking to $4,000/oz milestone for support - analyst

* Traders see 69% chance of rate hike in Sept - CME FedWatch

* US PCE data due on Thursday awaited for Fed cues

* Silver falls over 4%, platinum and palladium down over 2% (Updates price as of 1144 GMT)

By Sumit Saha

June 23 (Reuters) - Gold prices dropped more than 1% on Tuesday, as the U.S. dollar strengthened to a one-year high on market expectations of a stricter U.S. Federal Reserve, pressuring the non-yielding precious metal.

Spot gold fell 1.7% to $4,121.09an ounce, as of 1144 GMT, having touched its lowest since June 11 at $4,090.27 earlier. Bullion has fallen over 3% since the Fed meeting last week.

U.S. gold futures for August delivery fell 1.5% to $4,139/oz.

For gold, hawkish Fed policy to counter inflation arising from war-driven energy costs has outweighed softer oil prices after U.S.-Iran talks in Switzerland on Monday.

"The strength of the dollar, reinforced by last week's hawkish tilt from the Fed, is creating a headwind for gold prices," said ActivTrades analyst Ricardo Evangelista.

"Over the medium to long term, gold prices are likely to be driven primarily by monetary policy, with the Fed and the strength of the U.S. dollar remaining particularly significant factors."

The U.S. dollar scaled its highest level since May last year, after almost half of Fed policymakers in last week's meeting indicated that they now expect rates to rise this year.

Traders ratcheted up bets on higher interest rates this year, with an about 69% chance of a September hike, up from 29% last week, according to the CME FedWatch Tool.

Investors are looking out for U.S. Personal Consumption Expenditures data, the Fed's preferred inflation gauge, due later this week, for further monetary policy cues.

"The (gold) market had been looking to the psychological $4,000/oz milestone for support following the Iran peace deal, but sentiment has swung to selling on price rallies," Suki Cooper, analyst at Standard Chartered Bank, said in a note.

Deutsche Bank analyst Michael Hsueh in a note said that in a revised base case, the bank expects gold to reach $4,800/oz in Q4, consistent with an indefinite Fed hold, although a risk case of pricing 3-4 Fed hikes may bring gold to $3,800 per ounce.

A stronger dollar weighed on other metals as well, with spot silver dipping 4.7% to $62.12 per ounce, platinum lost 2.6% to $1,634.85, and palladium slipped 2.4% to $1,235.06. (Reporting by Sumit Saha and Swati Verma in Bengaluru; Editing by Harikrishnan Nair and Joyjeet Das)