US MIDDAY: gold rises

Gold rose early on Tuesday, snapping a two-day losing streak, boosted by simmering inflation pressures in China and sharp gains in industrial commodities amid better-than-expected US retail sales. Underlying economic uncertainties also supported silver's over 2 percent gains, after Federal Reserve Chairman Ben Bernanke warned that a failure to lift the US debt ceiling risks a potentially disastrous loss of confidence in America's creditworthiness.
Data in China, the world's second-largest economy, showed the pace of inflation was running at its fastest pace in almost three years, while a less-than-expected drop in US retail sales lifted the S&P 500 index by 1.5 percent. "The worse fears of the economic data has been discounted. There is more risk appetite out there, and some of that money is flowing into the precious metals," said Bill O'Neill, partner of commodities investment firm LOGIC Advisors.
Spot gold was up 0.6 percent at $1,524.40 an ounce by 2:55 pm EDT (1855 GMT), after it suffered its biggest one-day loss in a month. US August contract settled up $8.80 at $1,524.40 an ounce, after trading between $1,512.80 and $1,526.70. Volume was half of its 30-day average, consistent with lower recent volume. Gold is up 3 percent in the past four weeks on a flurry of disappointing US economic data including a weak jobs report.
Spot silver recovered from Monday's 4-percent slide, and was up 2.4 percent at $35.52 an ounce. On charts, silver's outlook turned bullish after it rose above key support near $34 an ounce, after the metal recently failed to regain its 55-day moving average twice in the $39 area, CitiFX analysts said.
Bullion gained as inflation in China and India accelerated in May, prompting Beijing to lift bank reserve requirements and keeping pressure on India to raise interest rates later this week even as Asia's two big growth engines show signs of slowing.
Gold extended gains following Bernanke's comment, after it fell 1 percent in each of the last two sessions. Bernanke said in the absence of a quick resolution to the battle over the debt limit, the United States could lose its prized AAA credit rating, while the US dollar's special status as a reserve currency might be damaged.
Holdings of the largest gold-backed ETF, New York's SPDR Gold Trust fell 0.08 percent on Monday from Friday, while the largest silver-backed ETF, New York's iShares Silver Trust saw its holdings fall 2.1 percent. Among platinum group metals, platinum gained 0.1 percent to $1,792.20 an ounce, and palladium rose 0.4 percent to $793.13 an ounce.