PRECIOUS-Gold rises 1 pct on commodities rally; silver up too

Wed Aug 14, 2013 4:29pm EDT

* Producer prices suggests Fed might not end stimulus early
    * Silver posts biggest six-day rally in 2 years
    * Gold market ignores another import control by India
    * Coming up: US consumer prices, jobless claims Thursday

 (Adds comments from fund manager, Fed officials, update market
activity)
    By Frank Tang and Clara Denina 
    NEW YORK/LONDON, Aug 14 (Reuters) - Gold rose around 1
percent on Wednesday as broad gains in the commodities complex
and signs of simmering inflation lifted bullion after the
previous day's drop.
    Silver jumped nearly 2 percent, outperforming gold and
notching its largest six-day rally in nearly two years, as
economic hopes boosted its industrial demand, analysts said. 
    The Labor Department said that U.S. producer prices were
flat in July, which could add to worries at the Federal Reserve
that inflation is running too low, indicating the U.S. central
bank might not end its stimulus until inflation begins to trend
higher. 
    Spot gold rose 1.1 percent to $1,334.84 per ounce by
3:56 p.m. EDT (1906 GMT). On Tuesday, gold ended 1 percent lower
as strong U.S. retail sales data boosted the dollar. 
    U.S. Comex gold futures for December delivery settled
up $12.90 at $1,333.40 an ounce, with trading volume about 40
percent below its 30-day average, preliminary Reuters data
showed.
    Despite the tame PPI data, traders said that a recent surge
in U.S. Treasury bond yields indicates gold's inflation-hedge
appeal could be rising.
    "The bond market is telling us that it's expecting some
inflation. That can make me a buyer of gold," said Sean
McGillivray, head of asset allocation at Great Pacific Wealth
Management.
    Yields on U.S. Treasuries held near two-year highs on
Wednesday. The benchmark 10-year bond yield has soared 67
percent since May on fears that the Fed might unwind its
bond-buying program as early as September. 
    As inflation rises, Treasuries investors require a higher
yield to compensate for the loss of purchasing power.
    On Tuesday, Atlanta Fed President Dennis Lockhart said he
did not see any signs that disinflation was accelerating, and
that the current inflation backdrop could still be consistent
with a modest pullback in quantitative easing. 
    "Just a mere mention that there could be some potential
inflation has moved gold up today," said Jeffrey Sica, chief
investment officer at New Jersey-based Sica Wealth Management,
which oversees more than $1 billion in client assets.
    Another senior Fed official, St. Louis Fed president James
Bullard, said on Wednesday low U.S. inflation is worrisome for
the country's economy and there is not much evidence it is
heading higher, highlighting an issue for the Fed as it weighs
tapering bond purchases.
    The gold market largely ignored news of another tightening
measure on physical bullion imports by India, the world's
largest gold consumer. 
    The 19-commodity Thomson Reuters-Jefferies CRB index
 climbed around 0.7 percent, led by gains in precious
metals and agricultural commodities.
    Among other precious metals, silver rose 1.9 percent
to $21.81 an ounce, after hitting a two-month high of $21.85. 
    Silver posted its sixth straight session of gains for the
first time since January. During that period it has gained 11
percent, its largest six-day rise since October 2011.
    Platinum was up 0.2 percent to $1,500.74 an ounce,
while palladium edged up 16 cents to $736.66 an ounce.
    
 3:56 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold DEC   1333.40  12.90   1.0  1315.10 1335.40  110,496
 US Silver SEP  21.787  0.444   2.1   21.265  21.845   50,153
 US Plat OCT   1505.20   5.50   0.4  1485.50 1506.40    7,587
 US Pall SEP    740.35   1.45   0.2   733.50  741.00    2,915
                                                               
 Gold          1334.84  14.15   1.1  1316.78 1335.80         
 Silver         21.810  0.400   1.9   21.300  21.850
 Platinum      1500.74   3.24   0.2  1488.00 1503.25
 Palladium      736.66   0.16   0.0   736.50  739.00
                                                               
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        115,676   192,310   188,574     23.03    0.25
 US Silver       61,821    47,154    54,139     28.85   -0.57
 US Platinum      7,716     9,073    12,504     21.11    0.00
 US Palladium     3,089     3,685     5,297                  
                                                               
 
 (Additional reporting by Zhe Sun in London and A.
Ananthalakshmi in Singapore; editing by Veronica Brown and Nick
Zieminski)
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