Gold down on rebounding dollar, stronger equities

LONDON, April 15 (Reuters) - Gold edged lower on Wednesday as European shares advanced and the dollar recouped losses made after weaker than expected U.S. economic data.

Spot gold was down 0.3 percent at $1,189.51 an ounce by 0944 GMT, not far off a two-week low of $1,183.68 on Tuesday.

U.S. gold for June delivery dropped $3.20 to $1,189.40 an ounce.

Bullion fell as much as 1.2 percent in the previous session, before paring losses on a lower dollar after data showed U.S. retail sales rose 0.9 percent in March, just below a market forecast of 1.0 percent.

The dollar has since recovered, rising 0.5 percent against a basket of currencies, and European shares hit a 14-year high before a European Central Bank policy meeting.

"Gold is having to really compete with other financial assets that offer yields," Societe Generale analyst Robin Bhar said.

"There is still a lot of work for gold to do on the upside, there are too many headwinds at the moment and I don't think that is going to change quickly."

The Federal Open Market Committee (FOMC) meets on April 28-29, with recent signals from policymakers suggesting the U.S. central bank could still raise interest rates in June despite recent weak economic data.

A U.S. rate increase, which would be the first in nearly a decade, dims gold's appeal as it does not pay interest.

However, Minneapolis Fed President Narayana Kocherlakota said raising rates this year would be "inappropriate" because it would delay the return of too-low inflation to the Fed's 2 percent goal.

Gold "continues to struggle for any upside ascendancy with a number of critical technical levels capping the market", MKS Group said in a note.

Data showing China's economy grew 7 percent in the first quarter, the slowest in six years, suggested that physical demand from the world's No. 2 consumer would remain tepid this year.

Premiums for physical gold on the Shanghai Gold Exchange picked up to $3-$4 an ounce over spot from just above a dollar earlier this week, although analysts say a slowing economy could cap Chinese demand.

"Given structural reforms and all this belt-tightening because of the perceived slowdown, I don't think there'll be much demand for gold for jewellery or for investment," said Howie Lee, an analyst at Phillip Futures.

Spot silver was unchanged at $16.11 an ounce. Platinum lost 0.3 percent to $1,146.95 an ounce and palladium rose 0.1 percent to $761 an ounce.