* Returning risk appetite boosts oil, weighs on dollar
* U.S. producer prices rise more than expected in June
* Physical gold demand lacklustre for jewellery, ETFs
(Releads, updates prices, adds comment)
By Jan Harvey
LONDON, July 14 (Reuters) - Gold prices extended gains on
Tuesday as traders bought into the metal as a currency hedge
amid weakness in the U.S. dollar, with a larger-than-expected
rise in U.S. producer prices also fuelling gains.
A rise in other commodities such as oil and the industrial
metals is further supporting the gold price, traders said.
Spot gold <XAU=> was bid at $925.10 an ounce at 1311 GMT,
against $920.00 an ounce late in New York on Monday. U.S. gold
futures for August delivery <GCQ9> on the COMEX division of the
New York Mercantile Exchange rose $2.70 to $925.20 an ounce.
"(Gold) fell last week on commodities liquidation, but held
above $900, which is good," said Simon Weeks, head of precious
metals at the Bank of Nova Scotia. "Now buyers are back as they
focus on an alternative to currencies."
The euro <EUR=> held its gains against the dollar after U.S.
retail sales and producer price data beat expectations. []
A burst of confidence in U.S. financial stocks lifted global
equities on Tuesday, while a strong set of earnings from Goldman
Sachs <GS.N> further lifted sentiment. []
Rising equities also helped appetite for other assets such
as oil, which climbed back above $60 a barrel, and industrial
metals. Strength in other commodities tends to support gold.
[] [].
The consensus-beating rise in the U.S. PPI, twice as big as
expected, is also reigniting fears over rising inflation,
against which gold is often bought as a hedge. June's producer
prices rose 1.8 percent. []
Buying of physical gold remained lacklustre, however. Demand
from the world's largest bullion consumer, India, suffered from
a summer lull. []
ETF FLAT
On the investment side, holdings of the main gold
exchange-traded fund, the SPDR Gold Trust <GLD>, were flat for a
third session on Monday. []
"Combined with equities' performance, we see credit market
risk as an important determinant of ETF gold holdings," said
Standard Bank in a note. "While credit market risk remains in
the financial system, it's still much lower than in Q4:08 and
Q1:09."
In supply news, workers in South Africa's gold sector
rejected a wage hike offer by gold producers, and vowed to
escalate the dispute. []
South Africa's National Union of Mineworkers said a strike
in the gold sector was "highly likely" after the rejection.
Silver <XAG=> recovered from the previous session's 10-week
low to rise in gold's wake. Silver <XAG=> was at $12.89 an ounce
against $12.82.
Nontheless, "silver looks very weak, with a potential move
back towards strong support at $12.00," said VTB Capital analyst
Andrey Kryuchenkov in a note.
Platinum <XPT=> was at $1,125.50 an ounce against $1,110,
while palladium <XPD=> was at $235 against $233.
ETF Securities said holdings of its London palladium-backed
exchange-traded commodity <PHPD.L> rose 4 percent to a record on
Monday, and were up nearly 7 percent week-on-week.
[]
Palladium is favoured by investors as a cheaper alternative
to platinum, analysts said.
(Reporting by Jan Harvey; Editing by Keiron Henderson)
