* Dollar lifts from lows vs euro, yen after inflation data
* Rising oil, industrial metal prices fuel inflation fears
(Releads, updates prices, adds comment)
By Jan Harvey
LONDON, June 1 (Reuters) - Gold retreated from the
three-month high it hit earlier on Monday as the dollar pared
losses versus the euro and the yen after U.S. inflation data.
Prices earlier reached their highest since late February on
the back of dollar weakness and amid fears government measures
to boost liquidity in the financial markets will fuel inflation.
Spot gold <XAU=> was bid at $978.60 an ounce at 1316 GMT
against $978.20 late in New York on Friday, well off its session
high of $988.50.
Afshin Nabavi, head of precious metals at MKS Finance, said
gold had reestablished its link with the dollar. "(We) should
see a small correction on the downside before testing $1,005
which is February's previous high," he said.
The dollar pared losses after a government report showed a
key inflation measure rose more than expected in April. []
Currency traders will be watching U.S. data due later this
week, starting with the ISM manufacturing survey on Monday and
culminating in key May non-farm payrolls numbers on Friday.
Data showing Chinese industrial activity expanded in May
helped offset news of GM's filing for bankruptcy protection,
fuelling gains in industrial commodities and boosting equities
to their highest in seven months. [] []
Oil rose nearly 2 percent to a new seven-month high as stock
market optimism and sustained hopes for an economic recovery
extended its biggest monthly gains in a decade. []
Rising crude prices typically boost buying of gold as a
hedge against oil-led inflation and raise interest in
commodities as an asset class.
COMMODITIES UPBEAT
"Commodities generally are upbeat at the moment," said Simon
Weeks, director of precious metals at the Bank of Nova Scotia.
"People are definitely buying hard assets as opposed to hard
currencies."
Gold is an attractive investment for both bulls and bears on
the economic outlook, he said.
"If things are getting better... it will go along as part of
the commodities sector, (but) there is enough concern out there
that some safe haven buying is also coming back in," he said.
While inflation fears and currencies are boosting interest
in gold, buying of jewellery and bullion-backed exchange traded
funds remained relatively lacklustre. [] []
Data released Friday showed a hefty rise in speculative net
long positions on New York's COMEX futures exchange. However,
this may leave gold vulnerable to a correction as such positions
are easily liquidated, analysts said. []
Silver <XAG=> tracked gold up to a near 10-month high of
$15.94 an ounce. Later the metal was bid at $15.75 against
$15.74. Platinum <XPT=> was bid at $1,210 an ounce against
$1,187, and palladium <XPD=> at $232.50 an ounce against $234.
"Platinum prices were buoyed by U.S. dollar weakness and the
rally in the broader commodities sector," HSBC said in a note.
(Additional reporting by Pratima Desai; editing by William
Hardy)
