PRECIOUS-Gold falls 1 pct as dollar firms; ECB eyed

* U.S. data sparks flight to dollar * Oil slips, traders fret over demand outlook * Traders await ECB rate decision on Thursday (Updates prices, adds comment)

By Jan Harvey

LONDON, Jan 14 (Reuters) - Gold fell 1 percent on Wednesday, giving up earlier gains as the dollar firmed against the euro after weaker-than-expected economic data sparked a flight to the relative safety of the U.S. currency.

Trading is expected to be muted ahead of the interest rate announcement of the European Central Bank on Thursday, traders said. The ECB is widely expected to cut rates by 50 basis points.

Spot gold XAU= was at $812.00/814.00 an ounce at 1523 GMT, down from $821.05 in New York late on Tuesday. It touched a high of $828.65 earlier in the session, but slipped as the euro retreated and European equities and base metals turned negative.

U.S. gold futures for February delivery GCG9 on the COMEX division of the New York Mercantile Exchange fell $8.10 to $812.60 an ounce.

"Gold has fallen as the dollar has increased on a flight to safety after very bad retail sales numbers," said Calyon metals analyst Robin Bhar.

"People were calling for a pretty bad retail sales number as it stood, but this was even worse than most people had feared," he said.

December retail sales numbers released earlier on Wednesday showed total sales down 2.7 percent last month, against expectations for a 1.2 percent fall. [ID:nCAT002459]

The U.S. currency extended gains against the euro as investors spooked by the outlook for the global economy bought into the dollar as a haven from risk. [ID:nLE544128]

While in the longer run risk aversion is also likely to benefit gold, in the short term currency moves will have more of an impact on the precious metal, analysts said.

The single currency also came under pressure after Standard and Poor's cut its credit ratings on Greece's sovereign debt.

Bullion is often bought as an alternative investment to the dollar and tends to move in the opposite direction to it.

All eyes are now on the interest rates decision of the ECB on Thursday, which will have a significant impact on the foreign exchange markets, and consequently on gold.

"Everyone is in wait-and-see mode for the ECB," said Simon Weeks, director of precious metals at the Bank of Nova Scotia.

Data released on Wednesday showed the German economy contracted sharply in the final quarter of 2008 and euro zone industrial production plunged for the seventh month running in November. [ID:nLE319511]