* Gold hits seven-week high as equities drop
* For a technical view on gold, click []
* Market seen well supported above $1,220 per ounce
(Adds comment, updates prices)
By Rebekah Curtis
LONDON, Aug 16 (Reuters) - Gold rose to its highest level
since early July on Monday, reprising its safe-haven properties,
as gloomy Japanese economic data hit shares and stoked investor
concern about the pace of global economic recovery.
Spot gold <XAU=> rose to $1,223.50 an ounce by 1400 GMT from
$1,214.50 late in New York on Friday, having hit an intraday day
high of $1,227.15 -- its highest since July 1. Bullion struck a
record high around $1,264 in June.
"You can consider this to be safe-haven buying. It is also
supported by the overall low interest rate environment that
makes gold additionally attractive to investors," said Alexander
Zumpfe of Heraeus Metals.
Leading economies' maintaining low interest rates is a
favourable environment for non-interest baring assets such as
gold.
"The market is looking technically well supported after it
broke through $1,220 per ounce," he added.
Japan's economy expanded just 0.1 percent in the quarter to
June, far less than analysts had expected and which diminished
investor appetite for taking risks.
Asian and European equities fell after the data, while on
Friday U.S. stocks closed out their worst week in six.
Safe-haven U.S. and German government bond yields hit new
lows after the much weaker than expected growth numbers from
Japan added to worries over a faltering global economic
recovery.[] []
"There are jitters about the global economic recovery, but
also the fact that we're trading comfortably above $1,200 is
prompting some interest in the gold market," said Eugen
Weinberg, an analyst at Commerzbank.
"Also I would not be surprised to see more physical buying
in front of the festive season in India."
Holdings were unchanged in the world's largest
bullion-backed ETF, SPDR Gold Trust, suggesting that some
investors were happy to hold on to bullion after recent U.S.
economic data pointed to weakness in the economy. []
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U.S. gold futures for December delivery <GCZ0> rose $9.00 to
$1,225.40 an ounce, extending gains from Friday when weak U.S.
economic data boosted the metal's safe have appeal.
CURRENCY CORRELATIONS
Gold resumed an inverse correlation with movements in the
dollar, which fell against the euro and other major currencies.
Recently the metal and U.S. currency had moved in the same
direction due to both being perceived as safe haven assets.
[]
"Gold's ... positive correlation with the euro resumed,
suggesting that the metal's place as the ultimate hedge against
risk remains secure," ABN AMRO said in a note.
"Especially since the outlook for the U.S. dollar remains
weak as far as the eye can see, with U.S. interest rates
likely to remain pinned to the floor well into 2011."
Oil prices stayed above $75. Higher oil prices are seen as
triggering inflationary pressures, which are supportive for gold
because the metal is seen as a hedge against inflation. []
In other metals silver <XAG=> rose in line with gold,
trading at $18.34 an ounce from $18.08 late on Friday in New
York. Platinum <XPT=> firmed to $1,525.00 an ounce from $1,520
an ounce and palladium to $477.40 an ounce from $472.
(Additional reporting by Veronica Brown in London; Editing by
William Hardy)
