Higher-than-expected U.S. jobless claims and producer prices data helped precious metals erase larger losses from earlier in the day.

This followed a fall in U.S. retail sales data on Wednesday, which dented sentiment that had boosted equity and commodity markets and signalled the economy’s troubles were far from over.

Spot gold was at $925.55 per ounce at 1407 GMT, from $925.45 late in New York on Wednesday, when it touched a six-week high on buying by gold-backed exchange-traded funds.

“The jobs data is worse than forecast,” said James Moore, an analyst at The Bullion Desk.com. “It’s a bit of a reality check that maybe the recession in the U.S. is going to take longer to crawl out of and the markets have got a little bit ahead of themselves.”

U.S. gold futures for June delivery on the COMEX division of the New York Mercantile Exchange were up 10 cents to $926.00 an ounce.

European shares extended losses on Thursday after the jobless claims, though they later flattened out. Losses on the equity markets have benefited gold in recent months, as investors buy bullion as a haven from risk in other markets.

“We think equity markets have overcooked the upturn,” said Michael Lewis, global head of commodities research at Deutsche Bank.

The dollar gave up gains after drifting higher against the euro following the weak U.S. retail data, which kept risk aversion high.

Gold typically moves in the opposite direction to the U.S. currency, to which it is often bought as an alternative investment. However, the usual relationship between the two has recently weakened, as both react to risk aversion.

BULLISH

With the world economy not out of the woods yet, analysts saw higher price prospects for gold.

“We’re bullish for the next couple of months. We feel that these reflationary trades…are now going to be under attack and those sorts of environments do tend to see flows into gold ETFs,” Lewis said, referring to recent gains in copper and oil prices.

The world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust (GLD) , earlier said holdings had risen to 1,105.62 tonnes as of May 13, up 1.53 tonnes from the previous business day for the first gain in a month.

“The inflow is still marginal relative to the massive gold inflows seen in the first quarter this year,” analysts at Commerzbank said in a research note. “In this context, we view the upward potential for gold as limited at present.”

Platinum was at $1,107.50 an ounce from $1,111.00 while silver was at $13.89 from $13.94 and palladium was at $222.50 against $220.50.

May 14 (Reuters)