Gold ends flat with Chinese tightening in focus

Gold bars are displayed to be photographed at bullion house in Mumbai December 3, 2009.

NEW YORK (Reuters) - Gold prices ended flat on Thursday as possible monetary tightening by China and lingering currency volatility kept bullion investors on the sidelines.

Chinese consumer inflation data spurted to a 16-month high in February, fueling speculation that the world's most populous nation will tighten monetary supply soon.

"The crux of the matter is that China's economic data is very strong. There is a lot of talk that they will raise rates by the next month or two," said Bruce Dunn, vice president of trading from New Jersey-based Auramet.

Higher inflation data usually supports gold, but a strong resolve by central banks to curb rising prices by raising interest rate decreases the metal's investment appeal.

Spot gold was priced at $1,108.10 an ounce at 3:28 p.m. EST (2028 GMT) against $1,107.85 late in New York on Wednesday. Earlier it hit a two-week low of $1,100.04 an ounce, but it held above the $1,100 level.

U.S. April gold futures on the COMEX division of the NYMEX settled up 10 cents at $1,108.20 an ounce.

Mostly mixed equities and currency markets also failed to provide direction to gold.

"There is a lot of uncertainty in the stock market. Right now, it is a wait-and-see attitude in the marketplace," said Adam Klopfenstein, senior market strategist at Lind-Waldock, a unit of MF Global.

The dollar traded little changed after mixed data on U.S. trade and jobless claims.

"Gold is struggling because we have a stronger dollar, and there has been very little inflow into exchange-traded funds," said Deutsche Bank's head of commodity research Michael Lewis.

Data showed holdings of the world's largest gold-backed ETF, New York's SPDR Gold Trust, fell by 0.609 tonnes on Wednesday, almost the same amount by which they rose at the end of last week.

Persistent fears over sovereign debt issues in peripheral euro zone economies like Greece and Spain are keeping the euro under pressure, but are also lifting safe-haven flows into gold.

"The next move is going to be dictated off the currency market," said Klopfenstein. A dollar rally due to more fiscal problems out of Europe will likely hurt gold, but the metal could benefit if an oversold euro bounces back, he said.

SELL ORDERS, CTA LIQUIDATION

Traders said that recent rallies toward the $1,125 to $1,130 area were met by heavy sell-orders, and that liquidation by commodity trading advisors (CTAs) also pressured prices.

In supply news, South Africa's statistics service said the country's gold output fell 18.2 percent year-on-year in January. The republic was the world's second-largest gold miner last year behind China, according to the World Gold Council.

Industrial metals slipped as production and inflation data from China stoked investor concerns of further monetary tightening in the world's top metals consumer. <MET/L>

Similar worries knocked the industrial precious metals lower. Autocatalyst material palladium, which last week benefited from strong Chinese car sales data, was the biggest faller, sliding as much as 3.5 percent before recovering.

The metal was last at $459 against $461.50.

Platinum was at $1,606 an ounce against $1,592. Silver was at $17.10 an ounce against $16.97.

(Additional reporting by Jan Harvey in London; editing by Jim Marshall)