* Speculation over ECB, Fed action on growth lifts prices
* Mixed U.S. data dampens hopes that Fed QE is imminent
* Global gold demand falls to two-year low-WGC (Updates prices)
By Jan Harvey
LONDON, Aug 16 (Reuters) - Gold firmed on Thursday on speculation that
central banks may be set to launch more bullion-friendly stimulus measures to
boost growth, though mixed U.S. data that dampened expectations for imminent
Federal Reserve action kept prices in a range.
The metal recovered early losses as the dollar retreated from a two-week high
against a currency basket. It broke above $1,600 in late July on talk that both
the Fed and the European Central Bank would take steps to stimulate their
Further monetary easing would benefit gold by boosting liquidity and
maintaining pressure on long-term interest rates, keeping the opportunity cost
of holding bullion at rock bottom, as well as fuelling inflation fears and
weighing on the dollar.
Spot gold was up 0.1 percent at $1,604.20 an ounce at 1209 GMT, while U.S.
gold futures for December delivery were flat at $1,606.60 an ounce.
"My general view is that for the time being major central banks will let go
of the mandate of price stability in favour of spurring growth figures," LGT
Capital Management analyst Bayram Dincer said.
"This means that the central banks in an explicit or implicit inflation
targeting regime will try to anchor inflation expectations around 3.0 percent,"
he said. "This change would be gold price supportive."
Data on Wednesday showed U.S. industrial output rose in July at its fastest
pace since April, a day after strong U.S. retail sales figures that dampened
expectations the Fed will launch another round of bond-buying, or quantitative
However, softer-than-expected inflation data reassured investors that price
pressures would not prevent the Fed from launching more QE if a more negative
view of growth emerges.
"A downward surprise in U.S. inflation numbers is spurring hopes for more
monetary stimulus, which would be positive for gold," Credit Suisse said in a
report on Thursday.
"Nevertheless, investment interest remains thin and technical momentum is
only neutral. As a result, we think gold could recover slightly but will
probably remain caught in the familiar $1,530-1,640 trading range."
PHYSICAL DEMAND SOFT IN Q2
A closely watched report from the World Gold Council showed on Thursday that
demand for physical gold from jewellers and investors fell in the second quarter
to its lowest level since the first three months of 2010.
Gold consumption fell 7 percent or nearly 76 tonnes to 990 tonnes as a drop
in buying in major consumers India and China outweighed a record quarter for
central bank purchases.
Gold purchases in Asia slowed after prices rebounded to more than $1,600 an
ounce on Thursday, as traders await the next drop in prices and demand remains
under pressure as economic uncertainties weigh on consumer sentiment.
On the supply side of the market, Canadian mining major Barrick Gold is in
talks to sell all or part of its 74 percent stake in African Barrick Gold to
China's largest gold producer, just two years after the underperforming
Tanzanian assets were spun off.
Among other precious metals, silver was up 0.1 percent at $27.83 an ounce,
while spot platinum was up 0.4 percent at $1,395.99 an ounce and spot palladium
was up 0.7 percent at $576.25 an ounce.
South African police ordered thousands of illegally striking miners armed
with machetes and sticks to lay down their weapons and leave Lonmin's Marikana
platinum mine on Thursday or face an assault by security forces.
Number three platinum miner Lonmin was forced to cease mining at its South
African operations after inter-union violence broke out there. Ten people,
including two policemen, have died in nearly a week of fighting between rival
worker factions at the Marikana mine. (Editing by Alison Birrane)