* Dismal U.S. job data fuels double-dip recession fear
* Gold rises the most in 7 weeks; snaps 3-week down streak
* SPDR gold ETF bullion holdings rise after recent loss
* Coming up: FOMC rate decision, policy statement due Tue
(Recasts, adds comments, updates prices to market close,
changes byline, dateline, previous LONDON)
By Frank Tang
NEW YORK, Aug 6 (Reuters) - Gold hit a three-week high on
Friday, gaining 1 percent after a dismal U.S. nonfarm payrolls
report increased the metal's safe-haven investment appeal amid
worries of a slower economic recovery.
A flurry of disappointing economic indicators this week
including consumer spending, housing and retail sales data
powered gold to its biggest gain in the last 7 weeks.
Bullion's two-percent rise this week also snapped its
three-week losing streak.
Gold accelerated gains and Wall Street sank in earlier
trade after government data showed U.S. private employers added
fewer workers to their payrolls in July than expected, a big
blow to an already weak economic recovery. []
Thomas Winmill, portfolio manager of Midas Fund <MIDSX.O>,
said gold benefited from economic fears after data showed a
double-dip recession was still possible.
"The job numbers made it clear that the second quarter was
weak. All these economic reports are suggesting that interest
rate will be low for the time being, and that is of course very
good for hard assets relative to other assets," Winmill said.
Spot gold <XAU=> rose as high as $1,210.90 an ounce, its
strongest level since July 15, and was last at $1,205.10 an
ounce at 2:24 p.m. EDT (1824 GMT), against $1,193.10 late in
New York on Thursday. U.S. gold futures for December delivery
<GCZ0> settled up $6 at $1,205.30.
Technical support also helped gold futures after a first
buy signal was triggered in four months according to the
closely watched MACD analysis.
(Graphic: http://link.reuters.com/nap53n)
The gold market also took heart from expectations of higher
physical demand from China, which earlier this week vowed to
develop its market and to allow more domestic banks to export
and import gold to encourage more as steps to encourage more
liquid trade. []
China is a key player in a number of commodity markets, but
although it is the biggest producer and the second biggest
consumer of gold, its trade has typically been largely
domestic.
"We believe greater availability of physical gold and gold
related financial products and improved accessibility for
international players will likely increase the trading volume
on the Shanghai gold exchange," said Deutsche Bank in a note.
INVERSE DOLLAR LINK
On Friday, gold was boosted by a weak dollar, which fell
against the euro and approached a 15-year low against the yen.
The usual inverse relationship between gold and the dollar
has shown signs of a resurgence, after the link loosened
earlier this year as extreme risk aversion benefited both
assets.
(Graphic: http://link.reuters.com/qes53n)
"We saw that negative correlation shift to a positive
correlation between the dollar and gold since January, up until
the last few weeks," said RBS analyst Daniel Major.
"Gold is going to fall back more into its traditional
relationship with the dollar," he said.
Recent outflows from gold exchange-traded funds also seemed
to have stalled on Thursday, with holdings of the biggest gold
ETF SPDR Gold Trust <GLD> rising for the first time since
mid-July. []
A Federal Reserve policy meeting next week is now in focus,
as a spate of weak economic data has strengthened the argument
the Fed may have to take further steps to boost the economy.
Silver <XAG=> rose in line with gold to $18.44 versus
$18.31. Platinum <XPT=> was at $1,565.60 an ounce against
$1,566.75 and palladium <XPD=> at $485.50 versus $492.20.
Prices at 3:01 p.m. EDT (1901 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCZ0> 1205.30 6.00 0.5% 10.0%
US silver <SIU0> 18.472 0.151 0.0% 9.7%
US platinum <PLV0> 1570.80 -1.70 -0.1% 6.8%
US palladium <PAU0> 487.60 -8.45 -1.7% 19.3%
Gold <XAU=> 1205.30 12.20 1.0% 9.9%
Silver <XAG=> 18.43 0.14 0.7% 9.4%
Platinum <XPT=> 1566.50 -0.25 0.0% 6.9%
Palladium <XPD=> 486.50 -5.70 -1.2% 20.0%
Gold Fix <XAUFIX=> 1207.75 13.25 1.1% 9.4%
Silver Fix <XAGFIX=> 18.30 -5.00 -0.3% 7.7%
Platinum Fix <XPTFIX=> 1571.00 4.00 0.3% 7.2%
Palladium Fix <XPDFIX=> 491.00 3.00 0.6% 22.1%
(Additional reporting by Jan Harvey in London; Editing by
Sofina Mirza-Reid)
