* Dollar weakens ahead of bond auction, U.S. data
* Oil up, benchmark commodities index closed at 7-month high
(Updates throughout, changes dateline from TOKYO)
By Jan Harvey
LONDON, June 11 (Reuters) - Gold inched higher in Europe on
Thursday as the weaker dollar lent support, but gains were
limited as the currency awaited fresh direction from another
U.S. government debt auction later in the session.
Spot gold <XAU=> was bid at $954.60 an ounce at 0929 GMT,
against $953.65 an ounce late in New York on Wednesday.
"(Gold) is just tracking the dollar really closely,"
Citigroup analyst David Thurtell said.
"The dollar is really torn at the moment between the bears
who are worried about a lot of supply of U.S. debt coming on to
the market, and the bulls who think that the U.S. is going to
pull out of the recession earlier and faster than Europe."
"Until that's a bit more certain I think the dollar and gold
will just track in a bit of a range," he added. "Gold seems
stuck at about the $945 to $965 level."
The dollar fell against a basket of currencies on Thursday,
paring some gains made after the benchmark U.S. Treasury yield
hit its highest point in eight months the previous day. []
Foreign exchange traders are awaiting direction from an
auction of 30-year Treasury bonds later in the session, which
may lead to a fresh rise in U.S. long-term yields.
Oil edged higher and held close to a near-eight month high
above $72 a barrel hit in earlier trade. Rising crude prices can
boost buying of gold as an inflation hedge. []
Stronger crude prices also indicate interest in commodities
as an asset class. A global commodities benchmark, the Reuters/
CRB index <.CRB>, closed at a seven-month high on Wednesday.
Equities lent little direction, with European shares barely
changed as traders stuck to the sidelines ahead of U.S. weekly
jobless claims and retail sales numbers due at 1230 GMT. []
SOFT DEMAND
Buying by exchange-traded funds was relatively soft, with
neither the largest gold ETF, the SPDR Gold Trust, or London's
ETF Securities reporting inflows on Wednesday. []
Gold buying in the world's largest bullion consumer, India,
remained slow on Thursday, with dealers unwilling to make fresh
purchases as the wedding season nears its end. []
On the supply side, mine output from South Africa fell 13
percent in volume terms in April from a year before, official
data showed. []
Meanwhile silver <XAG=> was flat at $15.15 an ounce,
platinum <XPT=> was at $1,262.50 an ounce against $1,261, and
palladium <XPD=> was at $257 against $253.
ETF buying of platinum continued, with ETF Securities
reporting another small inflow of just over 3,000 ounces on
Wednesday. Holdings of the company's ETFS Physical Platinum fund
have risen 42,700 ounces or 14 percent in the last week.
While ETF demand is likely to support the market, price
gains could be limited by the chilling effect of this on
jewellery buying, one of the only buoyant areas of consumption
at a time when industrial demand for the metal is languishing.
"Further platinum price gains could dampen Chinese jewellery
demand, which could increase the downside risks, as China is the
biggest platinum consumer," Standard Bank said in a note.
(Additional reporting by Kylie Maclellan; Editing by Anthony
Barker)
