By A. Ananthalakshmi
SINGAPORE (Reuters) - Gold hovered near a five-week high on Thursday after jumping overnight following sluggish U.S. retail sales data that triggered speculation the Federal Reserve would not raise interest rates soon.
Spot gold was steady at $1,214.10 an ounce by 0603 GMT, near the high of $1,218.80 reached on Wednesday. The metal closed that session up 1.9 percent.
Silver was also trading near five-week highs after a 3.5 percent gain overnight.
Data on Wednesday showed U.S. retail sales were flat in April as households cut back on purchases of automobiles and other big-ticket items, the latest sign the economy is struggling to rebound after barely growing in the first quarter.
The dollar tumbled to a three-month low against a basket of major currencies following the data.[USD/]
"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, adding that gold prices would be well supported if a rate rise looked to have been pushed back.
Gold suffered losses and the dollar rose when strong data last year led many to believe the Fed would raise rates from record lows starting in June.
But U.S. growth in the first quarter slowed to a crawl as a strong dollar, a harsh winter and a steep fall in oil prices hurt profits and discouraged consumers from spending. The Fed has said it would raise rates only when data points to a strengthening economy.
A delay in the rate rise could boost gold, a non-interest-paying asset.
"While we do not discount the possibility of further price gains in the near term, bullion may need to break over the technical 200-day moving average of $1,218 in order for the rally to be sustained," said HSBC analyst James Steel.
Bullion could be helped by the prospect of a disruption to supply from South Africa because of a labour dispute.
South Africa's Association of Mineworkers and Construction Union (AMCU) wants the basic pay for entry-level workers in the gold mining industry to be more than doubled, setting the stage for tough pay talks.
The AMCU's call for a doubling of wages in the platinum sector sparking a five-month strike last year.
An industry report released on Thursday showed that global gold demand eased 1 percent in the first quarter, as a drop in Chinese jewellery demand narrowly outweighed a recovery in Indian buying and Western appetite for bullion-backed funds.
Despite the drop, China was the world's biggest consumer of gold in the first quarter, well above India.
(Reporting by A. Ananthalakshmi; Editing by Richard Pullin and Alan Raybould)
