* Physical buyers cheered by steadier investment interest
* Stronger dollar versus the euro caps gains in gold
* Investors eye Chinese inflation data due Tuesday
(Updates prices, adds comment)
By Jan Harvey
LONDON, Feb 14 (Reuters) - Gold rose above $1,360 an ounce
on Monday as the dollar's retreat from highs versus the euro
took some pressure off prices, with a second consecutive weekly
price rise underpinning investors' confidence in the metal.
Comments from European Central Bank Governing Council member
Ewald Nowotny that the ECB was "vehemently not" turning soft on
inflation also gave prices a fillip, as it suggests that price
pressures remain in focus. Inflation can benefit gold.
[]
Spot gold <XAU=> was bid at $1,362.40 an ounce at 1425 GMT,
against $1,356.12 late in New York on Friday. U.S. gold futures
for April delivery <GCJ1> rose $3.10 an ounce to $1,363.50.
Prices remain caught between support near $1,320 an ounce
and resistance towards $1,370 as investors wait to see whether
the appetite for risk that boosted higher yielding assets at
gold's expense at the start of the year will be sustained.
"While the market's positive outlook on gold has moderated
since the beginning of 2011, we expect the metal's price to
remain supported by a range of factors," said Anne-Laure
Tremblay, an analyst at BNP Paribas.
"These include inflationary pressures -- gold is perceived
as an inflation hedge -- sovereign risk and concerns about the
value of the U.S. dollar."
Confidence in the longer-term strength of gold prices was
demonstrated last week by a report showing investors were
beginning to build up their exposure to U.S. gold futures.
The net non-commercial position in COMEX gold futures posted
its first weekly rise since early January and the largest weekly
rise since early April 2010, the Commodity Futures Trading
Commission said in its weekly Commitments of Traders report.
A stronger dollar limited gains in gold in earlier trade,
but the metal rose as it came off highs. Dollar strength curbs
the metal's appeal as an alternative asset and makes
dollar-priced assets more expensive for other currency holders.
[]
Traders awaited a raft of data, including Chinese inflation
numbers and a euro zone growth report due on Tuesday, to give
fresh direction to the market.
"China's CPI reading for January will be released tomorrow
and market chatter currently suggests it will be lower than
expected," said UBS. "Should CPI disappoint, this could act as a
catalyst for gold to trend lower in the short term."
INVESTMENT STILL SOFT
Gold buying in India, the world's biggest consumer of the
metal, was lacklustre for a third day on Monday as dealers
awaited further price falls. []
Demand for gold-backed exchange-traded funds also remained
soft, with holdings of the world's largest, New York's SPDR Gold
Trust <GLD>, falling by 55 tonnes so far this year. []
"Private investors, not only in the U.S. but also in Asia
and Europe, clearly have a different point of view on the actual
global economic and financial situation than institutional
market participants," said precious metals house Heraeus.
"They are still very much on the buying side, be it due to
fear of inflation or worries about distortions in the
international currency markets."
"However, this group is not going for exchange-traded
products like ETFs or certificates but for physical metal
directly," it said.
Among other metals, platinum <XPT=> was at $1,821.80 an
ounce against $1,802.50, while palladium <XPD=> was at $821.05
versus $811. Silver <XAG=> was at $30.31 an ounce versus $28.85.
The tightest physical silver supplies in four years tipped
the U.S. silver futures market into backwardation last week,
making near-term prices more expensive than more distant months.
Market watchers said it had been more than 10 years since
silver futures were last in backwardation, a term structure
associated with shortage of physical supply. []
(Reporting by Jan Harvey; Editing by Alison Birrane)
