* Gold hits seven-week high as Japan stirs economic fear
* Gold rises in tandem with US Treasury prices
* Coming up: John Paulson portfolio filing by Monday
(Recasts, updates prices, adds second byline/dateline)
By Frank Tang and Rebekah Curtis
NEW YORK/LONDON, Aug 16 (Reuters) - Gold rose to a 1-1/2
month high on Monday, after gloomy Japanese economic data
prompted safe-haven buying by investors worried about the
global economy.
Silver and platinum group metals, whose prices usually
reflect economic sentiment because of their industrial uses,
rose with gold. A sharp drop by the dollar also boosted gold,
which resumed its usual inverse correlation with the dollar.
Growth in Japan's economy slowed to a crawl with an anemic
0.1 percent rise in the second quarter, and analysts see
weakness ahead. []
"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.
Spot gold <XAU=> rose to $1,222.95 an ounce by 1:00 p.m.
EDT (1700 GMT) from $1,214.50 late in New York on Friday. It
hit an intraday day high of $1,227.15 -- its highest since July
1. Bullion struck a record high around $1,264 in June.
U.S. gold futures for December delivery <GCZ0> rose $9.00
to $1,225.40 an ounce.
U.S. Treasury prices jumped, with the 10-year yield hitting
a 17-month low as weak economic growth around the world spurred
talk of deflation. []
Gold managed to hold firm above $1,200 an ounce after the
Federal Reserve's downgrade of its economic outlook last week,
sending Wall Street down more than 3 percent.
Gold, which had traded in a broad range for two months, has
been in rally mode after a 1.5 percent rise last Thursday, its
biggest one-day gain in more than two months.
"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."
Physical gold demand tends to rise in August as jewelers
stockpile inventory ahead of the start of India's wedding
season and the Hindu festival of Dhanteras, traditionally major
gold-buying events.
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. []
CURRENCY CORRELATIONS
Analysts said that gold appeared to re-establish its
inverse correlation relationship with the dollar and a positive
link with the euro.
The 25-day simple correlation between gold and dollar was a
plus 0.2 on Monday, sharply lower than a high of over plus 0.8
earlier in August.
(Graphic: http://link.reuters.com/rus35n)
The correlation between gold and the U.S. currency has been
erratic so far this year, as the metal and the dollar both
benefited from safe-haven demand due to fears about global
growth at times.
In other metals, silver <XAG=> rose in line with gold,
trading at $18.40 an ounce from $18.08 late on Friday in New
York. Platinum <XPT=> firmed to $1,529.00 an ounce from $1,520
an ounce and palladium <XPD=> to $481.65 an ounce from $472.
Prices at 1:05 p.m. EDT (1705 GMT)
LAST NET PCT YTD
CHG CHG CHG
US gold <GCZ0> 1225.20 8.60 0.7% 11.8%
US silver <SIU0> 18.420 0.311 1.7% 9.3%
US platinum <PLV0> 1538.00 11.80 0.8% 4.6%
US palladium <PAU0> 485.25 8.00 1.7% 18.7%
Gold <XAU=> 1223.00 8.65 0.7% 11.6%
Silver <XAG=> 18.40 0.32 1.8% 9.3%
Platinum <XPT=> 1530.00 10.00 0.7% 4.4%
Palladium <XPD=> 483.00 11.00 2.3% 19.1%
Gold Fix <XAUFIX=> 1223.50 1.50 0.1% 10.8%
Silver Fix <XAGFIX=> 18.20 14.00 0.8% 7.1%
Platinum Fix <XPTFIX=> 1534.00 1.00 0.1% 4.6%
Palladium Fix <XPDFIX=> 482.00 2.00 0.4% 19.9%
(Additional reporting by Veronica Brown in London; Editing by
David Gregorio)
