* U.S. May inflation data lower than expected
* iShares Silver ETF hits record levels
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By Jan Harvey
LONDON, June 17 (Reuters) - Gold pared its earlier losses on
Wednesday as the dollar slipped against a basket of currencies
in the wake of lower-than-expected U.S. inflation data, which
fuelled expectations interest rates will remain low.
Spot gold <XAU=> was bid at $932.90 an ounce at 1313 GMT,
against $934.10 an ounce late in New York on Tuesday, having
earlier touched a low of $927.50.
The U.S. government's consumer price index, its broadest
inflation gauge, rose 0.1 percent last month, against
expectations for a 0.3 percent increase. []
"Gold seems to be ticking higher, taking cues from weakness
in the dollar after data revealed that U.S. inflation grew at a
lower than expected pace in the month of May 2009," said Pradeep
Unni, senior analyst at Richcomm Global Services in Dubai.
"Interest rates may remain low for a longer time-frame if
these economic conditions persist," he added. "Technical support
also helped the metal to rebound from the $930 levels, which
coincides with the 50-day moving average."
U.S. gold futures for June delivery <GCM9> on the COMEX
division of the New York Mercantile Exchange rose 80 cents to
$932.40 an ounce.
Gold has fallen nearly 5 percent in the last fortnight as
the dollar rose, with investors buying the currency as a haven
from risk on fears a stock market recovery was overdone. []
But questions over the dollar's reserve currency status have
since knocked the U.S. currency lower. Its weakness boosts
interest in gold as an alternative asset, and makes all
dollar-priced commodities cheaper for holders of other
currencies.
FUTURE INFLATION
The soft U.S. CPI reading may suggest that traders who
bought gold as a hedge against the prospect of future inflation
may have got ahead of themselves. Bullion is often bought as a
hedge against rising prices.
"We are still in a deflationary phase... (but) in the long
run obviously there will be inflation," said Andrey Kryuchenkov,
an analyst at VTB Capital.
"Inflationary expectations have been on the rise, and that
affects the dollar trade, and that in turn obviously works on
gold."
A slide in European shares to three-week lows early on
Wednesday prompted some investors to trim positions in the euro
and other currencies seen as higher risk. [] []
On other markets, oil prices also slipped, falling below $70
a barrel, as traders awaited weekly U.S. inventory data. Gold
often tracks oil, a key inflation indicator. []
Among other precious metals, silver <XAG=> was at $14.14 an
ounce against $14.17, largely tracking moves in gold.
The world's largest silver-backed exchange-traded fund, the
iShares Silver Trust <SLV>, said its holdings rose 1.4 percent
to a record on Tuesday. []
"The increase in ETF holdings yesterday suggests investors
may look to silver as a cheaper alternative to gold, but for
now, the metal should consolidate in the $13.90-14.65 area,"
said James Moore, an analyst at TheBullionDesk.com.
Platinum <XPT=> was at $1,198.50 an ounce against $1,215,
while palladium <XPD=> was at $239 against $240.
(Editing by Keiron Henderson)
