Gold rises after ECB inflation forecasts, U.S. data eyed

By Clara Denina

LONDON (Reuters) - Gold rose on Thursday after the European Central Bank (ECB) lifted its 2016 inflation forecast and as the market awaited key U.S. economic data.

The ECB held interest rates unchanged at record lows while raising next year's inflation expectation to 1.5 percent from 1.3 percent and predicting 2017 inflation at 1.8 percent.

"The ECB is much more optimistic regarding growth and inflation than we are ... people are looking at currency devaluation and see gold as an alternative," Commerzbank analyst Daniel Briesemann said.

Gold is usually viewed as a hedge against inflation.

Spot gold rose 0.7 percent to $1,208.60 an ounce by 1541 GMT, having lost 1 percent in the past three sessions on a firm dollar and robust U.S. economic data.

U.S. gold for April delivery edged 0.5 percent higher to $1,207.50 an ounce.

"We expect a further test of ($1,195), and should we see it break, it would be bearish for gold and open a test of the $1,131 low (reached in November 2014)," technical analysts at ScotiaMocatta wrote.

U.S. non-farm payroll numbers, due on Friday, will be scanned for clues on how they could affect the timing of any interest rate increase by the Federal Reserve.

Higher rates could hurt demand for non-interest-bearing assets such as gold.

"At some point gold is going to have to shrug off the interest hike theme, but we still think there are always people that won't believe it until it happens," Macquarie analyst Matthew Turner said.

"And those people, of course, have got history on their side because there hasn't been a rate hike for eight years and every year there has been a forecast of one and it hasn't happened yet. And in that sense, the non-farm payrolls should be quite important."

The dollar hit an 11-1/2 year peak against a basket of leading currencies. [MKTS/GLOB]

A stronger dollar makes gold more expensive for holders of other currencies, while a robust economy decreases the appeal of bullion, often seen as an alternative investment during times of economic and geopolitical uncertainty.

SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, saw its holdings drop to a one-month low of 760.80 tonnes this week, having posted a near 8 tonne fall, its biggest one-day outflow for the year so far.

Spot silver rose 0.7 percent to $16.30 an ounce, while palladium was flat at $824.55 an ounce and platinum was up 0.8 percent at $1,189 an ounce.

(Additional reporting by A. Ananthalakshmi in Singapore; Editing by David Evans and David Goodman)