Gold rises ahead of US data; off 2-week lows

By Lewa Pardomuan

SINGAPORE (Reuters) - Gold firmed on Friday as the dollar slipped against the euro on worries U.S. retail sales for February could show a drop in consumer spending, denting prospects for a sustainable economic recovery.

Despite the gains, bullion prices have lost more than 7 percent since powering to a lifetime high above $1,200 an ounce in December last year and is heading for its biggest weekly drop since mid-January at 2 percent.

Spot gold was at $1,112.30 by 0541 GMT, up $3 from New York's notional close on Thursday, when it hit a low of around $1,100, its weakest since January 25.

Bullion hovered below the 100-day moving average but was well above the 300-day moving average of around $1,000, with dealers expecting the metal's safe-haven appeal to remain intact amid fears over sovereign debt issues in euro zone economies.

Dealers in Singapore noted light buying by jewellers from Indonesia and Thailand, while sales of gold scrap were limited.

"We are above the 300-day moving average. I think there is still a chance for gold to continue to move higher in the days and weeks ahead," said Darren Heathcote, head of trading at Investec Australia in Sydney.

"The correlation with gold and the euro may return. Obviously it temporarily broke down when gold sold off yet the euro went higher. I think as the dollar weakens, we should see gold start to move ahead again."

The euro rose to $1.3699 ahead of the release of the U.S. retail sales data which could show a 0.2 percent decline in February versus a 0.5 percent increase in January.

The euro briefly came under pressure on Thursday after German Chancellor Angela Merkel said the priority for Greece was to win back the confidence of financial markets and the debt-stricken country's first steps were a positive start.

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The world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings stood at 1,115.511 tonnes as of March 11, unchanged from the previous business day.

U.S. gold futures for April delivery rose $4.1 an ounce to $1,112.3 after ending slightly higher on Thursday despite worries that possible monetary tightening by China could weigh on bullion.

"I think we will be stuck in a range. The price is not low enough to attract physical buying and not high enough to encourage sales of scrap," said a dealer in Singapore.

"We were seeing light buying earlier, but things are quieting down unfortunately," he added.

Silver, platinum and palladium -- also regarded as industrial metals -- steadied after being hit by fund selling following the release of strong consumer inflation data from China that triggered worries about monetary tightening.

Platinum group metals have gained on the prospects of steady demand for autocatalysts as the global economy recovers and rising investment demand after the launch of platinum- and palladium-backed exchange-traded products in New York earlier this year by a U.S. subsidiary of London's ETF Securities.

The world's largest silver-backed exchange-traded fund, the iShares Silver Trust, said its holdings fell 48.82 tonnes from the previous business day to 9,302.58 tonnes as of March 11.