* CPI data boosts equities; dollar sinks broadly
* Gold hits two-week high on weaker dollar
* SPDR gold ETF sees outflow
(Updates prices)
By Nicholas Vinocur and Jan Harvey
LONDON, July 15 (Reuters) - Gold rose to above $940 an ounce
on Wednesday, hitting a two-week high as the dollar fell to its
lowest in a month against a basket of currencies after data
showed U.S. consumer prices rose faster than expected in June.
Silver tracked gold higher, rising to a session peak of
$13.37 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 $938.45 an ounce at 1505 GMT, against $924.60 late in New
York on Tuesday. Silver was at $13.21 an ounce against $12.88.
Gold prices bounced to their 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. []
"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.
U.S. gold futures for August delivery <GCQ9> on the COMEX
division of the New York Mercantile Exchange also rose $15.90 to
$938.70 an ounce.
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.
APPETITE
"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 remote.
Demand for physical gold was lacklustre, meanwhile.
The largest gold ETF, New York's SPDR Gold Trust, saw an
outflow of more than 15 tonnes or 1.4 percent on Tuesday, while
jewellery demand in the world's largest bullion consumer, India,
was sluggish as buyers awaited lower prices. []
But gold has managed to hold above $900 an ounce in recent
weeks despite weak physical demand, 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 hit a record high above $1,030 an ounce in March 2008.
Among other precious metals, platinum <XPT=> was at $1,152
an ounce against $1,127.50, while palladium was at $246 against
$241.
(Reporting by Jan Harvey; Editing by Michael Kahn)
