Gold rises as Wall Street falls, shrugs off firm dollar

By Marcy Nicholson and Clara Denina

NEW YORK/LONDON (Reuters) - Gold prices rose on Friday, buoyed by weak U.S. equity markets and chart-based strength, as it shrugged off a higher dollar and strong U.S. economic data suggesting a brightening outlook for the economy.

The metal briefly gave back some gains after U.S. retail sales were reported to have increased 1.3 percent last month, the most since March 2015 and more than the 0.8 percent expected by economists.

Spot gold (XAU=) was up 0.8 percent at $1,273.53 an ounce at 2:46 p.m. EDT (1846 GMT). That left gold down 1.1 percent this week, the biggest weekly decline since the week ended March 25.

U.S. gold for June delivery (GCcv1) settled up 0.1 percent at $1,272.70 an ounce.

"When dollar's up and gold is up, that's a bull market for gold," said Eli Tesfaye, senior market strategist for brokerage RJO Futures in Chicago.

"We're getting a technical break out and equities are getting soft here."

The dollar rose to a two-week high against a basket of currencies, as the stronger-than-expected U.S. economic data appeared to boost expectations the Federal Reserve will raise interest rates more than once this year. [USD/]

The U.S currency had already received a boost overnight when two Fed officials said the central bank should raise rates if data points to an improving economy.

Strong economic data and the prospect of a rate increase in the next few months should weigh on gold, Citi strategist David Wilson said.

"The move (in the gold price) this year has really been down to the shift in the U.S. policy expectations," Deutsche Bank analyst Michael Hsueh said.

"It's more about ... when we start to see a consistent improvement in U.S. data that could push the pendulum the other way and push the dollar higher."

Gold has gained 20 percent this year after weak economic data in the United States and elsewhere eased expectations of a near-term increase in U.S. interest rates.

Higher rates would lift the opportunity cost of holding non-yielding gold.

Reflecting sustained optimism towards bullion, holdings of SPDR Gold Trust (GLD), the world's largest gold-backed exchange-traded fund, rose to the highest since November 2013. (HLDSPDRGT=XAU)

Technical analysts at ScotiaMocatta said their view of gold is neutral while it trades between the $1,303 resistance level and the $1,256 support.

Spot silver (XAG=) advanced 0.6 percent to $17.07 an ounce, platinum (XPT=) was up 0.4 percent at $1,047.66 and palladium (XPD=) was down 0.7 percent at $588.72.

(Additional reporting by Manolo Serapio Jr. in Manila; Editing by David Goodman and Steve Orlofsky)