PRECIOUS-Gold hits near 2-months high, scope for gains seen

                                
 * Bullion steady as economic uncertainties remain
                                
 * Dollar weakness favours gold with further upside seen
                                
 * Coming up: US producer prices, housing starts, at 1230 GMT
                                
 
                                
 (Updates throughout, adds comment/detail)
                                
 By Michael Taylor
                                
 LONDON, Aug 17 (Reuters) - Gold briefly touched its highest
level in nearly two months on Tuesday, boosted by a weak dollar
and expectations of further buying by investors concerned about
financial stability and looking for perceived safe haven assets.
                                
 Spot gold <XAU=> hit $1,227.60 -- its highest level since
July 1, and was later bid at $1,226.65 an ounce at 1138 GMT,
against $1,222.85 late in New York on Monday. 
                                
 U.S. gold futures for December delivery <GCZ0> rose 2.5
cents an ounce to $1,228.70.
                                
 "Historically, gold has a very strong relationship with
currencies and this has been somewhat mixed this year," said
said RBS analyst Daniel Major. "(But) the last few weeks ... the
currencies have started to have a bit more of a play on gold
prices. This has been the predominant driver of the rally."
                                
 The euro rose against the dollar and came off seven-week
lows against the yen, helped as solid results at Irish and
Spanish bond auctions alleviated concerns about heavily indebted
euro zone countries. [USD/]
                                
 But the euro struggled to hold above $1.29 on uneasiness
about the economic outlook, with a key German survey sparking
concerns about whether Europe's largest economy can sustain a
solid recovery. [ID:nDEG005695]
                                
 "People are worried about the pace of recovery, particularly
after some quite weak data out of the United States and Japan
recently," said Daniel Smith, an analyst at Standard Chartered
Bank. 
                                
 "At the moment it looks like the market is breaking down
that overhead resistance and we're likely to move up to $1,250
as the next target," he added
                                
 Bullion touched a record high of $1,264.90 an ounce on June
21.
                                
 Earlier this week, data showed that growth in Japan's
economy slowed to a crawl in the second quarter and analysts see
more weakness ahead. [ID:nTOE67901S]
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 For a graphic showing gold's 24-hour technical outlook, see:
http://graphics.thomsonreuters.com/WT/20101708093019.jpg
                                
  For a commodities performance graphic, click:
http://r.reuters.com/hun72k
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 Dealers in Asia reported buying from investors and selling
from jewellery makers. There was soft physical buying from top
consumer India as demand is set to pick up for the busy festival
season, starting with Raksha Bandhan on Aug. 24 and extending
till Dhanteras in November.
                                
 "We've seen some good buying out of India -- that is going
pretty well," added Smith. "Of course India has a problem with
inflation ... the impact on gold is a little bit unclear."
                                
 All eyes are on U.S. data due later in the day, including
U.S. July producer prices and July housing starts and permits
due at 1230 GMT, and U.S. July industrial production and
capacity utilisation numbers due at 1315 GMT. [ECI/US]
                                
 Ahead of that, German analyst and investor sentiment fell in
August to its lowest since April 2009, a closely watched survey
showed. [ID:nLDE67G0K0]
                                
 "Bullion gained ground with the late July short-term uptrend
intact as risk aversion and a fresh flight to safety pushed
prices towards 2-month highs," VTB Capital said in a note.
                                
 "Macro data has been far from rosy with the broader
market taking yet another hit, while the dollar index rebounded
towards July's highs."
                                
 Elsewhere investment demand for physically backed gold
remained strong.
                                
 A quarterly securities filing on Monday showed that
billionaire investor George Soros stuck with his big bet on gold
but slashed his holdings in dozens of major U.S. companies from
Verizon Communications to Pfizer. [ID:nN16273801]
                                
 The Singapore Mercantile Exchange said it will open for
trading in gold, oil and euro-dollar futures on Aug. 31. The
first phase of product launches will include a Gold Futures
Contract with physical delivery, West Texas Intermediate crude,
Brent-Euro crude and euro-dollar futures contracts, amongst
others. [ID:nSGE67G011]
                                
 Among other precious metals, silver <XAG=> was at $18.51 an
ounce versus $18.35. 
                                
 In related news, Bolivian protesters ended more than two
weeks of demonstrations on Monday that disrupted operations at
two of the world's top silver deposits, and Japan's Sumitomo
said it had resumed work at its halted mine. [ID:nN1674419]
                                
 Platinum <XPT=> was at $1,538.50 an ounce versus $1,529.00
and palladium <XPD=> at $488.38 against $480.50.
 (Reporting by Michael Taylor; editing by Alison Birrane)