* U.S. May inflation data lower than expected
* iShares Silver ETF hits record levels
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By Jan Harvey and Kylie MacLellan
LONDON, June 17 (Reuters) - Gold edged higher in choppy
trade on Wednesday as the dollar slipped in the wake of
lower-than-expected U.S. inflation data for May, which boosted
expectations interest rates may stay low.
Spot gold <XAU=> was bid at $935.40 an ounce at 1534 GMT,
against $934.10 an ounce late in New York on Tuesday. U.S. gold
futures for June delivery <GCM9> on the COMEX division of the
New York Mercantile Exchange rose 10 cents to $931.70 an ounce.
U.S. equities declined on Wednesday after European shares
slipped to three-week lows, as investors grew sceptical about
the speed of the global economic recovery. [] []
Fairfax analyst Marc Elliott said while rising risk aversion
was turning investors away from equities towards safer assets
such as gold, it was also boosting the dollar, and "if the
dollar gets stronger, that is not so good for gold".
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. []
The dollar fell after the CPI data. Its weakness boosts
interest in gold as an alternative asset, and makes all
dollar-priced commodities cheaper for holders of other
currencies. []
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.
TICKING HIGHER
"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."
Softer oil prices, which fell more than a dollar after a
U.S. government report showed a surprise increase in gasoline
supplies in the world's top consumer, are limiting gains in the
precious metal.
Gold often tracks oil, a key inflation indicator. []
Among other precious metals, silver <XAG=> was at $14.22 an
ounce against $14.17.
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 $1,202.50 an ounce against $1,215,
while palladium <XPD=> was flat at $240.
(Editing by Keiron Henderson)
