Gold extends gains on softer dollar, sluggish U.S. data

SINGAPORE (Reuters) - Gold extended gains above $1,200 an ounce on Thursday, rising for a second straight session on a softer dollar and weak data on U.S. industrial production.

FUNDAMENTALS

* Spot gold gained 0.4 percent to $1,206.55 an ounce by 0026 GMT, after climbing 0.7 percent on Wednesday.

* The precious metal got a boost as the dollar declined for a third straight session against a basket of major currencies on Thursday. [USD/]

* A weaker dollar makes gold cheaper for holders of other currencies, while also increasing the metal's appeal as a hedge.

* The dollar nursed modest losses against the yen and euro early, and suffered bigger falls versus commodity currencies led by the Canadian dollar.

* Weakness in the greenback was also prompted by sluggish U.S. economic data released on Wednesday.

* U.S. industrial output posted its biggest drop in more than 2-1/2 years in March in part as oil and gas well drilling plummeted, highlighting the negative impact of lower crude prices and a strong dollar on the economy.

* The dour report was the latest sign that growth slowed sharply in the first quarter and suggested the U.S. central bank could delay raising interest rates until later this year.

* Investors believe a hike in U.S. rates could dent demand for bullion, a non-interest-paying asset.

* Analysts have made big cuts to expectations for gold and silver prices this year and next after the metals, weighed down by the prospect of higher U.S. interest rates, failed to recover last year's losses in early 2015.

* A poll of 38 analysts and traders conducted by Reuters over the last month returned a median forecast of $1,209 an ounce for gold this year, down from $1,234 an ounce in a similar poll conducted in January.

* For the top stories on metals and other news, click [TOP/MTL] or [GOL/]

MARKET NEWS

* U.S. stocks rallied following several strong earnings reports on Wednesday, while European shares hit a 14-year high after the European Central Bank affirmed its loose policy stance. [MKTS/GLOB]

DATA/EVENTS (GMT)

China Foreign direct investment Mar

1230 U.S. Housing starts Mar

1230 U.S. Building permits Mar

1230 U.S. Weekly jobless claims

1400 U.S. Philly Fed business index Apr

PRICES AT 0026 GMT

Metal Last Change Pct chg

Spot gold 1206.55 5.25 0.44

Spot silver 16.42 0.13 0.8

Spot platinum 1163.49 6.49 0.56

Spot palladium 769.47 1.97 0.26

Comex gold 1206.6 5.3 0.44

Comex silver 16.4 0.121 0.74

Euro 1.074

DXY 97.933

COMEX gold and silver contracts show the

most active months

(Reporting by A. Ananthalakshmi; Editing by Richard Pullin)