By Clara Denina
LONDON (Reuters) - Gold hit a five-week high on Thursday as the dollar remained under pressure following sluggish U.S. data that pushed back expectations of when interest rates in the world's largest economy will rise.
Spot gold rose to the highest since April 6 at $1,219.60 an ounce and was trading up 0.3 percent at $1,219.70 an ounce by 1019 GMT.
The metal was also heading for its biggest weekly gain in five months, mostly aided by an almost 2 percent increase on Wednesday after the dollar tumbled to three-month lows.
Data on Wednesday showed U.S. retail sales were flat in April as consumers cut back on purchases of automobiles and other big-ticket items, the latest sign the economy is struggling to rebound.
"I'm forecasting gold to average $1,200 this quarter, as a slightly weaker dollar will continue to be supportive until we see some stronger data points," Citigroup strategist David Wilson said.
"Only a rebound in employment data will start triggering talks about an imminent interest rate hike again because now expectations have been dampened."
The greenback was down 0.4 percent against a basket of leading currencies, while European equities suffered from bond market jitters and a rebound in the euro.
A weaker dollar makes gold cheaper for holders of other currencies, while dipping shares lift the metal's appeal as a hedge against risk.
"This broad-based weakness in the U.S. retail space confirms our belief that the Fed's hands are tied at the moment," said Howie Lee, an analyst at Phillip Futures.
Gold had dropped when strong data last year heightened views that the Federal Reserve would raise interest rates from record lows, starting in June.
But U.S. growth in the first quarter slowed to a crawl. The Federal Reserve has said it would raise rates only when data points to a strengthening economy.
Bullion could also find some support from the prospect of a disruption to supply in South Africa because of a labour dispute over pay.
An industry report released on Thursday showed that global gold demand eased one percent in the first quarter, due to a drop in Chinese jewellery demand.
Despite the drop, China was the world's biggest consumer of gold in the first quarter, well above India.
Silver rose to a seven-week high of $17.38. Platinum rose 0.2 percent to $1,150 an ounce, while palladium was down 0.2 percent at $782.70 an ounce.
(Additional reporting by A. Ananthalakshmi in Singapore; editing by David Clarke)
