SINGAPORE: Gold held near a 3-1/2-month high on Thursday as sluggish economic data from China and the United States stoked speculation the Federal Reserve will not raise rates this year.

Spot gold steadied at $1,183.21 an ounce by 0340 GMT following a four-day rally. The metal climbed to $1,190 on Tuesday, its highest since June 22.

Data on Wednesday showed US retail sales barely rose in September and producer prices recorded their biggest decline in eight months. Consumer inflation in China cooled more than expected in September, while producer prices extended their slide to a 43rd straight month.

Investors believe the sluggishness in the US economy amidst a weak global economic backdrop may cause Fed policymakers to delay the first rate increase in nearly a decade to 2016. Gold, as a non-yielding asset, tends to benefit from ultra-low rates.

"Soft US retail and inflation combined with disinflationary China data undercut the rationale for a rate rise in some investor's view and helped propel gold," said HSBC analyst James Steel.

"But more than that, we continue to sense changing attitudes to gold from investors, with recent positive comments from some fund managers," he said.

Elliott Management Chief Executive Paul Singer said on Wednesday every institutional portfolio should be 5-10 percent invested in gold to protect against zero interest rates that are degrading the value of paper currency.

Gold was the one tradable asset that has been "treated unfairly", he said at the Sohn Investment Conference, adding that his fund holds gold through options.

Steel said $1,200, however, may still be a tough resistance level.

Bullion was also supported on Thursday by weakness in the dollar.

The greenback wallowed around seven-week lows against a basket of currencies, after weak U.S. data prompted investors to scale back bets that the Fed would hike interest rates by the end of 2015.

Physical buying of gold, however, softened due to the rise in prices.

Premiums on the Shanghai Gold Exchange, an indication of demand in top consumer China, fell to about 50 cents an ounce on Thursday from $2-$3 in the previous session. Earlier in the day, the Chinese prices had even dipped to a small discount.

Among other precious metals, silver hit a 3-1/2-month high of $16.18 an ounce on Thursday. Platinum climbed to a five-week high of $1,000, while palladium also edged up.

Investors will be watching for more data due later in the session, including weekly jobless claims, for clues about the economy and its impact on the Fed monetary policy.