May 13, 2016 / 11:00 AM / 4 years ago

PRECIOUS-Gold rises as Wall street falls, shrugs off firm dollar

* Dollar strengthens on potential rise in interest rates
    * U.S. retail sales gain the most since March 2015

 (Recasts first paragraph, updates prices; adds comment, second
byline, NEW YORK dateline)
    By Marcy Nicholson and Clara Denina 
    NEW YORK/LONDON, May 13 (Reuters) - Gold prices rose on
Friday, buoyed by weak U.S. equity markets and chart-based
strength, as it shrugged off a higher dollar and strong U.S.
economic data suggesting a brightening outlook for the economy.
    The metal briefly gave back some gains after U.S. retail
sales were reported to have increased 1.3 percent last month,
the most since March 2015 and more than the 0.8 percent expected
by economists. 
    Spot gold was up 0.8 percent at $1,273.53 an ounce at
2:46 p.m. EDT (1846 GMT). That left gold down 1.1 percent this
week, the biggest weekly decline since the week ended March 25.
    U.S. gold for June delivery settled up 0.1 percent
at $1,272.70 an ounce.
    "When dollar's up and gold is up, that's a bull market for
gold," said Eli Tesfaye, senior market strategist for brokerage
RJO Futures in Chicago.
    "We're getting a technical break out and equities are
getting soft here."
    The dollar rose to a two-week high against a basket of
currencies, as the stronger-than-expected U.S. economic data
appeared to boost expectations the Federal Reserve will raise
interest rates more than once this year. 
    The U.S currency had already received a boost overnight when
two Fed officials said the central bank should raise rates if
data points to an improving economy.  
    Strong economic data and the prospect of a rate increase in
the next few months should weigh on gold, Citi strategist David
Wilson said. 
    "The move (in the gold price) this year has really been down
to the shift in the U.S. policy expectations," Deutsche Bank
analyst Michael Hsueh said.
    "It's more about ... when we start to see a consistent
improvement in U.S. data that could push the pendulum the other
way and push the dollar higher." 
    Gold has gained 20 percent this year after weak economic
data in the United States and elsewhere eased expectations of a
near-term increase in U.S. interest rates.
    Higher rates would lift the opportunity cost of holding
non-yielding gold.
    Reflecting sustained optimism toward bullion, holdings of
SPDR Gold Trust, the world's largest gold-backed
exchange-traded fund, rose to the highest since November 2013.
 
    Technical analysts at ScotiaMocatta said their view of gold
is neutral while it trades between the $1,303 resistance level
and the $1,256 support.
    Spot silver advanced 0.6 percent to $17.07 an ounce,
platinum was up 0.4 percent at $1,047.66 and palladium
 was down 0.7 percent at $588.72.

 (Additional reporting by Manolo Serapio Jr. in Manila; Editing
by David Goodman and Steve Orlofsky)
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