* Gold up fifth day in a row; biggest 5-day gain since May
* Technical bounce lifts metal to 1-1/2 month high
* Sentiment improves after SPDR Gold Trust holdings rise
* Coming up: U.S. weekly jobless claims data due Thursday
(Recasts, adds comments, updates prices to market close)
By Frank Tang
NEW YORK, Aug 18 (Reuters) - Gold rose to a 1-1/2 month high
on Wednesday, extending a rally to a fifth day on strong physical
demand and as the dollar's initial losses triggered technical
buying.
The metal has risen nearly 3 percent in the last five
sessions, the biggest five-day percentage rise since May.
Silver and platinum group metals stayed lower on broad
weakness in commodities and a decline in crude oil.
Bullion benefited from a weaker dollar against major
currencies. Earlier this week, however, gold rose on safe-haven
buying along with U.S. Treasuries.
"It's still a safe-haven mentality as people are not satisfied
with the fiat currencies. They see the $1,220 level as a possible
bargain as we get closer to the Indian wedding season and there
was physical buying overnight," said Michael Daly, gold specialist
at Chicago-based futures broker PFGBest.
Physical gold demand tends to rise in August as jewelers
stockpile inventory ahead of the start of top consumer India's
wedding season. The country's busy festival season starts with
Raksha Bandhan on Aug. 24 and extends until Dhanteras in November,
the single biggest gold-buying day.
Spot gold <XAU=> was at $1,229.15 per ounce by 3:22 p.m. EDT
(1922 GMT), up from $1,222.90 late in New York on Tuesday. U.S.
gold futures for December delivery <GCZ0> settled up $3.10 at
$1,231.40 per ounce.
Turnover in COMEX gold remained quiet in the summer months,
near a one-year low set on Tuesday, preliminary Reuters data
showed.
However, silver futures volume spiked to more than 70,000
lots, their highest level in nearly two months, due to heavy
profit-taking in an overbought market, traders said.
Gold moved higher as the dollar fell sharply against a basket
of major currencies <.DXY> in earlier trade, resuming its usual
inverse correlation with the U.S. currency that reappeared
recently. The dollar index traded flat in later sessions.
Gold is strengthening its inverse correlation relationship
with the dollar and a positive link with the euro, analysts said.
The 25-day simple correlation between gold and the dollar fell
to a plus 0.1 on Monday, sharply lower than a high of over plus
0.8 earlier in August.
After trading in a broad range for two months, gold has
rallied this week on worries about a double-dip recession after a
flurry of weak economic data and the Federal Reserve's downgrade
of its economic outlook.
On charts, gold is poised to challenge its all-time high at
$1,264.90 an ounce set on June 21, after the metal held above
$1,160 an ounce back in late July.
FUNDS BUY OPTIONS
COMEX floor trader Jonathan Jossen said gold futures' rise was
"purely technical" as prices began to rally after the metal found
support at $1,223 an ounce, where a series of successive highs
were made back in mid-July.
Strong fund buying also suggested gold could have a sharp move
in the near term, Jossen said.
"There are a lot of big options trade, and the funds are
getting back in. The funds will put their bets on when they think
technically it is going to make a move," Jossen said.
U.S. stocks also rose as advancing consumer shares helped push
the S&P 500 into positive territory, while crude oil fell to a
five-week low as government data showed crude inventories and oil
products rose to record highs. [] []
The world's largest gold-backed exchange-traded fund, SPDR
Gold Trust <GLD.P>, said its holdings rose to 1,294.604 tonnes by
Aug. 17 from 1,286.699 tonnes on Aug. 12. Holdings hit a record at
1,320.436 tonnes on June 29. []
Silver <XAG=> was at $18.38 per ounce compared with $18.47
late on Tuesday in New York. Platinum <XPT=> was at $1,529.00 from
$1,538.50, while palladium <XPD=> was at $489 from $493.50.
Prices at 3:21 p.m. EDT (1921 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCZ0> 1231.40 3.10 0.3% 12.3%
US silver <SIU0> 18.399 -0.196 0.0% 9.2%
US platinum <PLV0> 1536.50 -10.10 -0.7% 4.5%
US palladium <PAU0> 490.40 -6.90 -1.4% 19.9%
Gold <XAU=> 1229.20 6.30 0.5% 12.1%
Silver <XAG=> 18.38 -0.09 -0.5% 9.1%
Platinum <XPT=> 1529.00 -9.50 -0.6% 4.3%
Palladium <XPD=> 489.00 -4.50 -0.9% 20.6%
Gold Fix <XAUFIX=> 1218.00 -5.00 -0.4% 10.3%
Silver Fix <XAGFIX=> 18.36 -18.00 -1.0% 8.1%
Platinum Fix <XPTFIX=> 1537.00 6.00 0.4% 4.8%
Palladium Fix <XPDFIX=> 490.00 4.00 0.8% 21.9%
(Additional reporting by Veronica Brown and Rebekah Curtis in
London and Lewa Pardomuan in Singapore; editing by Jim Marshall)
