* CPI data boosts equities; dollar sinks broadly
* Gold hits two-week high on weaker dollar
* SPDR gold ETF sees outflow
By Nicholas Vincour and Jan Harvey
LONDON, July 15 (Reuters) - Gold prices rose above $940 on
Wednesday, hitting a two-week high as the dollar retreated
against a basket of six major currencies after data showed U.S.
consumer prices rose faster than expected in June.
Silver tracked gold higher, rising to a session peak of
$13.32 an ounce and reversing much of the slide that took the
metal to a 10-week low earlier this week.
Spot gold <XAU=> hit a high of $941.20 an ounce and was bid
at $939.80 an ounce at 1346 GMT, against $924.60 late in New
York on Tuesday. Silver was at $13.26 an ounce against $12.88.
The precious metal bounced to its highest level since July 2
after monthly CPI data showed consumer prices rose a slightly
faster-than-expected 0.7 percent in June [].
Combined with an improvement in northeastern manufacturing
activity, the CPI data boosted investor sentiment and sent the
dollar into retreat against a basket of six major currencies,
raising gold's appeal for holders of foreign currencies. []
Healthier risk appetite also boosted crude prices and equity
markets, pushing global stocks to their highest level in nearly
two weeks and lifting oil <CLc1> by more than 2 percent.
"The dollar has been the main driver this afternoon in terms
of flows into commodities," said Dan Smith, an analyst at
Standard Chartered. "That's been the main thing rather than the
actual inflation aspect, which remains quite far off.
"It's interesting to see that gold is now picking up on the
back of this improving sentiment," he added.
Warmer attitudes toward risk pushed crude <CLc1> above $60 a
barrel, with help from data that showed crude oil and gasoline
stockpiles fell last week, as well as gains on other markets.
Base metals also climbed, reflecting interest in commodities.
"At the moment the linkage between risk appetite and the
U.S. dollar is clear -- the U.S. dollar rallies when equities
are under pressure and vice versa," UBS analyst John Reade said
in a note.
"If this were to change, such that the dollar were to fall
during a period of risk aversion, then gold could do very well
indeed, as the two buying forces -- risk aversion and a hedge
against the USD -- would then be combined rather than opposing."
He said this was only likely to happen if confidence were
lost in the dollar as a reserve asset, which is seen as
unlikely.
LONG TERM UPSIDE?
In spite of rising equity markets, gold has managed to hold
above $900 per ounce in recent weeks, backing up market players
who see the price rising even further in coming months.
Aurele Storno, a fund manager at Swiss group Lombard Odier,
told Reuters on Wednesday that gold could set a record by
December, and the metal's average price would probably be higher
in 2010 than this year. []
Gold's record high of over $1,030 an ounce was set in March
2008.
However, demand for physical gold from jewellers and to back
exchange-traded funds was lacklustre. The largest gold ETF, New
York's SPDR Gold Trust, saw an outflow of more than 15 tonnes or
1.4 percent on Tuesday. []
Jewellery demand in the world's largest bullion consumer,
India, was also sluggish as buyers awaited lower prices. "There
could be more buying if prices decline below the $900 an ounce
level," said one dealer in a state-run bank.
Among other precious metals, platinum <XPT=> was at
$1,151.50 an ounce against $1,127.50, while palladium was at
$246 against $241.
(Reporting by Jan Harvey; Editing by Keiron Henderson)
