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Gold prices tick higher on Fed pause expectations

Kitco News

*U.S. PPI sees sharpest dip in 3-1/2-years in Oct
* U.S. retail sales drops for the first time in seven months
*Silver hits highest since Sept. 22

Nov 16 (Reuters) - Gold prices rose on Thursday as the U.S. Treasury yields edged lower, amid prospects that the Federal Reserve is done with its rate hike cycle.

Spot gold gained 0.3% to $1,965.08 per ounce, as of 1056 GMT. U.S. gold futures rose 0.2% to $1,967.70. "Gold will sustain its recent strong gains as long as the price holds above $1,930. The outlook for lower rates and continued demand from central banks should ensure enough support to withstand any short-term strength in economic data," said Ole Hansen, Saxo Bank's head of commodity strategy.

Data on Wednesday showed U.S. producer prices fell the most in three-and-a-half years in October, the latest indication of subsiding inflation pressures, while retail sales declined for the first time in seven months. On Tuesday, data showed U.S. headline consumer prices were unchanged in October.

Signs of slowing inflation boosted bets among investors that the Fed is done with rate hikes. "A Santa rally in stocks may reduce demand for gold from an alternative and safe haven perspective, but overall we remain patiently bullish," said Hansen. Even though gold is known as a hedge against inflation, lower interest rates boost the non-yielding asset's appeal.

Helping bullion, the dollar index steadied against a basket of currencies, not far from an over two-month low of 103.98 while benchmark U.S. 10-year Treasury yields fell to 4.50%. "Central banks should continue to buy gold with China continuing to raise its gold reserves," said SP Angel analyst John Meyer.

Spot silver climbed 0.9% to $23.65 per ounce, after hitting a near two-month high earlier in the session. Platinum was up 0.2% at $897.71. Palladium fell 0.6% to $1,025.80 per ounce.

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