PRECIOUS-Gold rises after China data boosts yuan against dollar

Recasts, adds comments and updates prices, as of 0320 GMT

By Swati Verma

Sept 15 (Reuters) - Gold prices gained on Friday as the dollar eased against the yuan after promising China economic data boosted recovery hopes in the world's top bullion consumer, although the possibility of further U.S. interest rate hikes kept investors on edge.

Spot gold XAU= was up 0.3% at $1,915.09 per ounce by 0320 GMT. Bullion was still on track for a small weekly decline after dropping to $1,900 level, its lowest since Aug. 23, on Thursday. U.S. gold futures GCcv1 were up 0.2% to $1,936.70.

The yuan hit two-week highs against the dollar after data showed China factory output and retail sales in August beat forecasts in boost to recovery prospects. A softer dollar makes greenback-priced bullion more attractive for overseas buyers. USD/

Data on Thursday showed U.S. producer prices increased by the most in more than a year last month while retail sales also beat expectations, boosted by a surge in gasoline prices.

This comes after U.S. consumer prices in August increased by the most in 14 months, keeping bets alive for further rate hikes by the Federal Reserve after a likely pause week.

"The outlook for rates to be kept high for longer has been keeping -yielding gold prices under pressure," said Yeap Jun Rong, a market strategist at IG.

"Given the still-resilient economic conditions in the U.S., it does seem to warrant the for rate cuts anytime soon, with the timeline for cuts constantly pushed back into mid year."

The European Central Bank also raised its key interest rate to a record high of 4% on Thursday, but signalled that the hike was likely to be its last.

Higher rates to curb inflation tend to lower demand for bullion, which yields interest.

Spot silver XAG= jumped 1% to $22.86 per ounce. Platinum XPT= gained 0.6% to $911.92 and palladium XPD= added 0.3% to $1,254.42, both looking poised for weekly gains.

(Reporting by Swati Verma in Bengaluru; Editing by Sherry Jacob-Phillips)

((Swati.Verma@thomsonreuters.com; +91 8894503862;))