* U.S. Fed minutes due on Wed in focus
* Silver hits one-week high
* Spot gold may rise to $1,876/oz -Reuters technical analyst
May 17 (Reuters) - Gold prices hit a 3-1/2 month high on
Monday as a dip in U.S. Treasury yields and persistent inflation
worries in the bullion market burnished its appeal.
Spot gold rose 0.4% to $1,848.66 per ounce by 1220
GMT, after hitting its highest since Feb. 2. U.S. gold futures
gained 0.5% to $1,848.00.
"Higher than expected (U.S.) consumer price inflation and
weaker retail sales was really the potent combination for gold,"
said Ole Hansen, head of commodity strategy at Saxo Bank.
"Higher inflation has been the key source of inspiration for
renewed demand that we have seen in gold, especially during the
last couple of weeks."
U.S. economic readings last week showed April U.S. retail
sales unexpectedly stalled and a bigger-than-expected rise in
The Fed sought to ease market concerns about rising
inflation after the data, keeping a lid on U.S. Treasury yields.
Benchmark U.S. 10-year Treasury yields slipped
to their lowest in nearly a week, reducing the opportunity cost
of holding non-interest bearing gold.
Investors now await minutes of the U.S. Federal Reserve's
last meeting due on Wednesday for more cues on the central
bank's monetary policy and any comments on inflation.
Gold is seen as a hedge against rising inflation.
SPDR Gold Trust, the world's largest gold-backed
exchange-traded fund, said its holdings rose 0.4% to 1,028.36
tonnes on Friday.
Spot gold may rise to $1,876 per ounce, as it has broken a
resistance at $1,847, according to Reuters technical analyst
Elsewhere, platinum rose 0.2% to $1,227.32 per ounce.
The World Platinum Investment Council (WPIC) earlier said
the global platinum market will be more undersupplied this year
than it previously thought as economic recovery fuels a surge in
demand from industry.
Palladium inched 0.1% higher to $2,895.87 per ounce,
while silver rose 0.6% to $27.58.
(Reporting by Nallur Sethuraman and Eileen Soreng in Bengaluru;
editing by Emelia Sithole-Matarise and Jason Neely)