* Gold climbs for fifth straight session
* U.S. monthly inflation data stronger than expected
* China gold premiums dip on higher prices
(Adds comment, byline, NEW YORK dateline; updates prices)
By Marcy Nicholson and Jan Harvey
NEW YORK/LONDON, Oct 15 (Reuters) - Gold pared gains after
reaching a 3-1/2-month high on Thursday as a
stronger-than-expected reading of U.S. inflation drove the
dollar index .DXY higher.
The data, which showed a steady pickup in underlying price
pressures, revived speculation that the Federal Reserve may end
its ultra-low interest rate policy later this year. FRX/
Spot gold XAU= was up 0.1 percent at $1,185.73 an ounce at
2:56 p.m. EDT (1856 GMT), after climbing to $1,190.63, the
highest since June 22 and the fifth straight day higher.
U.S. gold futures GCv1 for December delivery settled up
$7.70 an ounce, or 0.7 percent, at $1,187.50, extending gains
after closing above the 200-day moving average on Wednesday for
the first time in five months.
"Gold showed impressive mettle recovering to close higher
after falling nearly $20 from intraday highs as weekly jobless
claims matched the lowest print in ten years," said Tai Wong,
director of base and precious metals trading for BMO Capital
Markets in New York.
"Market participants remain a bit cagey as bullion has
disappointed multiple times this year but the outlook remains
solidly positive with the Fed on indefinite hold."
U.S. jobless claims fell more than expected, potentially
keeping the door open to an interest rate increase this year.
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Gold benefits from low interest rates that cut the
opportunity cost of holding non-yielding assets.
"Over the last couple of days the gold market has been
pricing out the Fed (raising rates) ... because of data
weakness. Today's data wasn't as weak as expected, so there's a
feeling that it maybe ran too fast," ABN Amro analyst Georgette
Boele said.
The world's largest gold-backed exchange-traded fund, New
York-listed SPDR Gold Shares GLD , said its holdings rose 7.7
tonnes on Wednesday, the biggest gain since Feb. 2.
"Once gold gets above $1,170 an ounce and the 200-day
moving average, it puts it on the radar for institutional
investors," Sharps Pixley Chief Executive Ross Norman said.
Physical buying of gold, however, softened due to the rise
in prices with premiums on the Shanghai Gold Exchange down to
about 50 cents an ounce from $2-$3 in the previous session.
A Reuters poll showed gold prices are still expected to post
another year of losses in 2016, while platinum price outlooks
were lowered. urn:newsml:reuters.com:*:nL8N12D40K urn:newsml:reuters.com:*:nL8N12D3UX
Silver XAG= was flat at $16.12 an ounce, after touching
its highest since late June at $16.19 an ounce.
Platinum XPT= was up 0.5 percent at $1,000.50 an ounce and
palladium XPD= was up 0.6 percent at $701.75 an ounce.