CORRECTED-PRECIOUS-Gold drops as U.S. data boosts dollar, Treasury yields
(Corrects second bullet point to '6-year low' from '6-yr high')
* Dollar rises 0.2 percent after U.S. data
* U.S. jobless claims at 6-year low last week
* U.S. 10-yr Treasury yields at 2-year highs
* SPDR Gold fund sees rare inflows
By Zhe Sun and Clara Denina
LONDON, Aug 15 (Reuters) - Gold fell 1.1 percent on Thursday, back from a three-week high hit earlier, as the dollar rose and U.S. Treasury yields hit two-year highs after strong U.S. data bolstered the case for cut in the Fed's economic stimulus programme.
U.S. consumer prices rose 0.2 percent in July, while a separate report showed the number of Americans filing new claims for unemployment benefits fell to a near six-year low last week.
The latest data was seen by analysts as reassuring Federal Reserve officials worried about U.S. economic growth as they weigh trimming their $85 billion worth of monthly bond buying as early as September.
Spot gold fell as much as 1.1 percent to a session low of $1,318.81 an ounce after the data and stood down 0.7 percent to $1,325.49 by 1328 GMT.
The metal had started the session on a strong footing, hitting its highest since July 24 at $1,345.09 after St. Louis Fed president James Bullard said he had not yet made up his mind on whether next month's policy meeting would be too soon to curb quantitative easing.
"We've had (some strength) over the last few days in response to the slightly more dovish sentiment from the Fed, but the employment data reverses that," Citi analyst David Wilson said.
"We're still in the middle of this debate over if and when tapering will occur... we view that starting sooner rather than later, so nearer the September date, on the expectation that employment data will gradually continue to improve."
Thursday's data lifted the dollar, lower initially, up 0.2 percent, while pushing 10-year U.S. Treasury yields as high as 2.8 percent.
Returns from U.S. bonds are closely watched by the gold market, given that the metal pays no interest, as these are viewed as a key indicator of what the Fed action will be in September, analysts said.
An early end to the Fed's quantitative easing programme could hurt assets such as gold that had been boosted by central bank liquidity and a low interest rates environment, which encourages investors to put money into non-interest-bearing assets.
Quarterly reports from top U.S. hedge funds showed that many had reduced, and in some cases completely disposed of, their stakes in SPDR amid a sharp drop in prices this year. Longtime bull John Paulson halved his stake in SPDR.
Outflows from the eight biggest gold ETFs tracked by Reuters have totalled nearly 20 million ounces, or $27 billion, so far this year. Rare inflows tend to boost market sentiment.
Holdings of SPDR Gold Trust rose for the first time since June 10 last Friday and had remained unchanged before rising 0.23 percent to 913.23 tonnes on Wednesday, raising hopes that the worst of outflows from the fund is over.
Demand in India and China could each cross 1,000 tonnes this year, the World Gold Council said on Thursday. It also said overall gold demand fell 12 percent in the second quarter due to the outflows from ETFs.
Silver followed gold's downtrend, falling 0.2 percent to $21.78 an ounce. It hit a two-month high of $22.16 earlier, benefiting from holdings at a four-month high in the world's largest silver-backed exchange-traded fund, iShares Silver Trust .
Platinum rose to its highest in more than two months, and was last trading up 0.1 percent to $1,500.99 an ounce, while palladium hit its highest since late July at $745.97 an ounce. (Additional reporting by A. Ananthalakshmi in Singapore; editing by Veronica Brown and Keiron Henderson)
- WTO overcomes last minute hitch to reach its first global trade deal
- Pennsylvania newlyweds "just wanted to murder someone together:" police
- Colorado baker discriminated by denying gay couple wedding cake: judge
- U.S. freeze shows no sign of weekend melt after deadly storm
- Flights delayed as air pollution hits record in Shanghai