PRECIOUS-Gold hits highest since early July; outlook firm

                                
 * Bullion underpinned as economic uncertainties remain
                                
 * Dollar weakness favours gold with further upside seen
                                
 * Data shows funds kept big bets on gold
                                
 
                                
 (Updates throughout, adds comment/detail)
                                
 By Michael Taylor
                                
 LONDON, Aug 17 (Reuters) - Gold touched its highest level in
nearly two months on Tuesday, boosted by dollar weakness and
expectations of further buying by investors concerned about
financial stability and looking for perceived safe haven assets.
                                
 Spot gold <XAU=> hit $1,228.45 -- its highest level since
July 1, and was later bid at $1,225.05 an ounce at 1415 GMT,
against $1,222.85 late in New York on Monday.
                                
 U.S. gold futures for December delivery <GCZ0> rose $1.60 to
$1,227.80.
                                
 "We think it's a good sign that the market has been able to
recover from a bit of weakness in June and July when the
technical picture didn't look so good," Credit Suisse analyst
Tobias Merath said.
                                
 "The longer term outlook is fairly encouraging with dollar
weakness and more importantly after the U.S. Federal Reserve
meeting, bond yields dropped. This is positive as it reduces the
opportunity cost of holding gold," he added.
                                
 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 hit 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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 FUND INTEREST STRONG
                                
 Despite price corrections in June and July, major fund
interest in gold appeared to remain steadfast. A table of the
five largest U.S. listed equity positions at John Paulson's
Paulson & Co. Inc. featuring SPDR Gold <GLD.P> and Anglogold
Ashanti <ANGJ.J> showed no change on the quarter as at June 30.
[ID:nN13196743]
                                
 Similarly, billionaire investor George Soros in the second
quarter stuck with his big bet on gold. The fund firm said it
owned 5.24 million shares of the SPDR Gold Trust <GLD.P> worth
$638 million as of June 30. [ID:nN16273801].
                                
 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
until Dhanteras in November.
                                
 "We've seen some good buying out of India -- that is going
pretty well," Standard Chartered's Smith said. "Of course India
has a problem with inflation ... the impact on gold is a little
bit unclear."
                                
 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 $18.49 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 $1,537.15 an ounce versus $1,529.00
and palladium <XPD=> at $493.38 against $480.50.
  (Additional reporting by Veronica Brown in London; editing by
Sue Thomas)