* Subdued inflation data, strong dollar limit gold's rise
* U.S. Senate's support for planned IMF gold sale ignored
* Market eyes Fed's interest-setting meeting next week
(Recasts, adds quotes, closing prices; changes dateline from
LONDON)
By Frank Tang
NEW YORK, June 19 (Reuters) - Gold futures ended a tad
higher on Friday, but tamed inflation worries and the dollar's
recent strength could limit the metal to a narrow trading range
ahead of a U.S. Federal Reserve meeting next week.
Gold's positive correlation with other commodities has been
rising as better economic indicators and lower-than-expected
inflation data have prompted investment funds to unwind some of
the long positions they added this month.
"Both the CPI and PPI numbers that came out this week
showed that there wasn't a big concern about inflation," said
Bruce Dunn, vice president of trading at New Jersey-based
Auramet Trading.
The closely watched U.S. consumer and producer prices
reports this week were sharply lower than economists had
forecast, dampening bullion's appeal as a hedge against
inflation.
U.S. August gold futures <GCQ9> settled up $1.60 at $936.20
an ounce on the COMEX division of the New York Mercantile
Exchange.
Spot gold <XAU=> was at $932.90 an ounce at 2:30 p.m. EDT
(1830 GMT), against $932.35 an ounce late in New York on
Thursday.
Also, the recent strength of the U.S. currency has also
weighed down on dollar hedge buying in gold, sending the
metal's prices falling from a three-month high above $990.
"If you are looking at the ups and downs of gold in its
narrow trading range, it is more or less a reflection of the
swings in the euro/dollar exchange rate," said Peter Fertig, a
consultant at Quantitative Commodity Research in Germany.
The dollar weakened against a basket of major currencies on
Friday as a recent spate of upbeat economic indicators boosted
buying of higher yielding currencies at the expense of the
greenback.
Meanwhile, the gold market shook off news that the U.S.
Senate on Thursday approved a bill that supports a planned sale
of 400 tonnes (12.97 million ounces) of gold by the
International Monetary Fund. []
U.S. congressional approval is needed before the U.S.
representative on the IMF's board can support the sale of the
gold.
Market watchers expect the gold sale would be gradual and
could be incorporated into the Central Bank Gold Sale agreement
to minimize interruption in the open market.
"It will be done in such a way that there will be no
disruptions, and it's not going to have a huge impact to the
market," Auramet's Dunn said.
In addition, lower physical buying at current high prices,
absent fresh stimulus into the market, also hindered gold's
rise.
Traders will now focus on a two-day policy and
interest-setting meeting by the Federal Reserve next week.
Silver <XAG=> was at $14.16 an ounce, against $14.19.
Platinum <XPT=> was at $1,209 an ounce, against $1,200, and
palladium <XPD=> was at $243.50, against $238.
ETF Securities said holdings of its ETFS Physical Palladium
fund <PHPD.L> rose on Thursday more than 3,000 ounces, or 1
percent, to 315,572 ounces. The fund's reserves were up 10,000
ounces, or 3.3 percent, week-on-week. []
Close Change Pct 2008 YTD
Chg Close Pct Chg
US gold <GCQ9> 936.20 1.60 0.2 884.30 5.9
US silver <SIN9> 14.200 -0.040 -0.3 11.295 25.7
US platinum <PLN9> 1211.20 3.60 0.3 941.50 28.6
US palladium <PAU9> 246.15 6.45 2.7 188.70 30.4
Prices at 2:30 p.m. EDT (1830 GMT)
Gold <XAU=> 933.30 0.95 0.1 878.200 6.3
Silver <XAG=> 14.16 -0.03 -0.2 11.30 25.3
Platinum <XPT=> 1209.00 9.00 0.8 924.50 30.8
Palladium <XPD=> 243.50 5.50 2.3 184.50 32.0
Gold Fix <XAUFIX=> 935.25 -5.25 -0.6 836.50 11.8
Silver Fix <XAGFIX=> 14.230 0.040 0.3 14.760 -3.6
Platinum Fix <XPTFIX=> 1212.00 0.00 0.0 1529.00 -20.7
Palladium Fix <XPDFIX=> 243.00 0.00 0.0 365.00 -33.4
-------------------------------------------------------------
Prices in dollars per ounce.
2008 close for U.S. gold second contract month, U.S. silver and
palladium third contract months and U.S. platinum fourth
contract month.
(Additional reporting by Jan Harvey in London; Editing by
Walter Bagley)
