* Gold hits seven-week high as Japan stirs economic fear
* Bullion boosted by dollar drop; inverse link resuming
* Gold rises in tandem with US Treasury prices
* Coming up: John Paulson portfolio filing by Monday
(Recasts, updates prices to market close, adds comments)
By Frank Tang
NEW YORK, Aug 16 (Reuters) - Gold rose to a 1-1/2 month
high on Monday, gaining for a third consecutive session, 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.
"The weakening U.S. dollar, and obviously the continuing
the high degree of uncertainty about the global recovery are
all helping gold prices," said Peter Buchanan, senior
economist, CIBC World Markets in Toronto.
Gold benefited as the dollar fell broadly on negative
sentiment stemming from weak Japanese growth data, with an
anemic 0.1 percent rise in the second quarter, and analysts see
weakness ahead. []
Spot gold <XAU=> rose to $1,224.75 an ounce by 3:05 p.m.
EDT (2005 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> settled up
$9.60 at $1,226.20 an ounce.
Gold managed to hold firm above $1,200 an ounce after the
U.S. Federal Reserve's downgrade of its economic outlook,
sending Wall Street down more than 3 percent last week.
Gold, which had traded in a broad range for two months, has
been in rally mode after a 1.5 percent rise last Thursday on
worries about a double-dip recession after a flurry of weak
economic data and the Fed's reassessment.
On Monday, the metal rose in tandem with rising U.S.
Treasury prices, with the 10-year yield hitting a 17-month low
as weak economic growth around the world spurred talk of
deflation. Gold tends to fall as the metal's safe-haven appeal
is eroded when Treasuries prices rise. []
CIBC's Buchanan said the move suggested that safe-haven
flow has been going into both gold and Treasuries.
Expectations of governments keeping interest rates low also
boosted the metal and other assets.
"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.
Analysts said that gold's recent rise was backed by
physical buying as jewelers began to stock inventory ahead of
higher demand toward the end of the year.
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.
CURRENCY CORRELATIONS
Analysts said that gold appeared to reestablish 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
largely 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 $18.39 an ounce from $18.08 late on Friday in New
York. Platinum <XPT=> firmed to $1,528.50 an ounce from $1,520
an ounce and palladium <XPD=> rose to $483 an ounce from $472.
Prices at 2:59 p.m. EDT (1859 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCZ0> 1226.20 9.60 0.8% 11.9%
US silver <SIU0> 18.427 0.318 0.0% 9.4%
US platinum <PLV0> 1537.30 11.10 0.7% 4.5%
US palladium <PAU0> 485.75 8.50 1.8% 18.8%
Gold <XAU=> 1224.80 10.30 0.8% 11.7%
Silver <XAG=> 18.38 0.30 1.7% 9.1%
Platinum <XPT=> 1529.00 9.00 0.6% 4.3%
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 Rebekah Curtis and Veronica Brown in
London; Editing by Marguerita Choy)
