Gold rises as sluggish US data pressures dollar

[LONDON] Gold rose for a second day on Thursday as soft US housing and jobless reports weighed on the dollar, with a run of downbeat data adding to uncertainty over the timing of a rate rise from the Federal Reserve.

Data released on Thursday showed the number of Americans filing new claims for jobless benefits unexpectedly rose last week, while US housing starts rose far less than expected in March.

That follows a report on Wednesday showing the biggest drop in US industrial output in more than 2-1/2 years last month. Soft data supports speculation that the Fed will delay raising interest rates until later this year.

Any delay could boost interest in bullion, a non-interest-paying asset.

Spot gold was up 0.3 per cent to US$1,205.21 an ounce by 1244 GMT, while US gold for June delivery rose US$3.90 to US$1,205.20 an ounce.

"The market needs to get past the first rate hike to move away from this no-man's land that it is trapped in," said Standard Chartered analyst Nicholas Snowdon. "

But after that, the realisation that the rate hike cycle is a lot shallower and shorter than it had previously been conceived will take some of the momentum out of the US dollar rally," he said.

"We are looking at a September rate (increase) and there could still be a fairly extended period of trading in this near-US$1,200 level before prices rise at year-end," he added.

The euro pared early losses it made on the back of concerns over Greece and a fall in already meagre baseline returns on European government bonds to rise 0.4 per cent against the dollar in early afternoon trade.

European equities were down 0.8 per cent as concerns about Greece's debt situation prompted investors to take some profits after the previous session's 14-year highs.

Analysts have made big cuts to expectations for gold and silver prices this year and the next after the metals, weighed down by the prospect of higher US interest rates, failed to recover last year's losses in early 2015.

US data will remain in focus until there is further clarity on the timing of a rate rise.

"The market is day to day data dependent, with good news bearish for metals and slower economic data creating bullish impulses," Kitco Metals Inc said in a note on Thursday.

Spot silver was up 0.9 per cent at US$16.44 an ounce. Platinum was up 0.8 per cent at US$1,166.24 an ounce and palladium was up 0.5 per cent at US$771.25 an ounce.

REUTERS