* Charts improve as market breaks above 20-day moving average
* Inflation concerns replace deflation worry to support gold
* SPDR gold holdings <XAUEXT-NYS-TT> unchanged
By Chikako Mogi
TOKYO, July 16 (Reuters) - Gold prices eased on Thursday as
the dollar's rise spurred profit-taking on bullion's jump to a
two-week high the previous day when U.S. consumer price data
stoked concerns about rising inflation.
Optimism about economic recovery prospects drove stocks
higher, encouraging investors to take more risks and weighing on
the dollar, while inflation worries returned after the U.S. price
data came in stronger than expected.
Gold investors continued to take cues from the dollar, as a
rise in the currency reduces bullion's appeal as an alternative
to U.S. currency and assets, but emerging inflation concerns are
helping to improve gold's technical charts, traders said.
As the market approached key resistance of $950, the rise in
the dollar prompted investors to take profits, said Louis Lok, a
senior dealer at Bank of China in Hong Kong.
The whole situation "is related to the U.S. dollar, and
investors are taking profits ahead of important resistance," he
said.
"But the market is finding a new excuse to buy gold as a
hedge against inflation fears after the U.S. prices data. Any dip
will be a good opportunity to buy," he said.
The break of the 20-day moving average around $927-$930 paves
the way for the market to test $950, a level it failed to sustain
when players tried to establish a floor after prices had been
steadily falling from near $990 in early June, traders said.
"The market broke the resistance that stood at $927-928, and
that has encouraged fresh buying," Lok said.
Spot gold <XAU=> eased 0.2 percent to $936.40 per ounce as of
0303 GMT, compared with New York's notional close of $938.45 on
Wednesday, when it rose to near $942.
U.S. gold futures for August delivery <GCQ9> fell 0.3 percent
to $936.70, from $939.40 an ounce on the COMEX division of the
New York Mercantile Exchange. The August contract rose to $942.30
on Wednesday, its highest since July 1.
Economic optimism was reinforced on Thursday as China's
second-quarter gross domestic product rose 7.9 percent against
the previous year, beating expectations, while its first-half GDP
rose 7.1 percent against a year earlier.
This followed U.S. manufacturing data which suggested the
recession is abating, and minutes from the Federal Reserve's most
recent policy-setting meeting that showed officials saw the U.S.
contraction was slowing. []
Inflation worries emerged along with the economic data, as
U.S. consumer prices rose at a slightly faster-than-expected 0.7
percent pace in June. []
Earlier this week, data showed U.S. producer prices soared by
1.8 percent, twice as much as expected, in June for the steepest
gain since November.
Traders expected selling by major Asian players such as
Vietnam to cap prices while investment flows will likely remain
slow.
The world's largest gold-backed exchange-traded fund, the
SPDR Gold Trust <GLD>, said holdings were unchanged at 1,094.54
tonnes as of July 15, after falling 1.4 percent the day before,
its largest drop in three months. []
PRICES
Precious metals prices at 0310 GMT
Spot Gold 936.50 -1.95 -0.21 6.40
Spot Silver 13.22 -0.03 -0.23 16.78
Spot Platinum 1164.50 8.50 +0.74 24.95
Spot Palladium 244.00 -0.50 -0.20 32.25
TOCOM Gold 2845.00 51.00 +1.83 10.57 28872
TOCOM Platinum 3548.00 107.00 +3.11 33.79 10806
TOCOM Silver 401.50 9.40 +2.40 25.74 212
TOCOM Palladium 745.00 10.00 +1.36 35.45 151
Euro/Dollar 1.4075
Dollar/Yen 94.16
TOCOM prices in yen per gram, except TOCOM silver which is
priced in yen per 10 grams. Spot prices in $ per ounce.
(Editing by Chris Gallagher)
