* Gold had hit 2-mth high; silver, palladium 3-1/2 mth peaks
* Main gold, silver ETF holdings increase
* Dollar falls, stock markets rise in London and New York
(Updates prices, adds detail, comment)
By Jan Harvey
LONDON, Sept 1 (Reuters) - Gold eased on Wednesday after
better-than-expected U.S. manufacturing data lifted appetite for
stocks and other assets seen as higher risk after earlier
hitting two-month highs amid concerns over economic recovery.
Spot gold <XAU=> eased to $1,244.55 an ounce at 1457 GMT,
from $1,248.99 late on Tuesday in New York. U.S. gold futures
for December delivery <GCZ0> fell $4.00 an ounce to $1,246.30.
Gold had hit a high of $1,254.65 an ounce in earlier trade
but struggled to maintain those gains as investors worried that
the market may have run ahead of itself.
"Comex open interest has started to improve, which is good,"
said Simon Weeks, head of precious metals at the Bank of Nova
Scotia.
"But I would also like to see much more in the way of
investment coming in both in ETFs and in particular via cross
currencies as that will prove that gold is acting as a currency
in its own right."
The wider markets showed better appetite for nominally
higher-risk assets. Commodities largely firmed, with oil rising
2.7 percent and base metals also climbing. [] []
U.S. stocks extended broad-based gains on Wednesday, rising
more than 2 percent after data showed the manufacturing sector
grew more quickly than expected in August. European shares also
rose, while the dollar index fell 1 percent. [] []
Meanwhile, U.S. Treasury debt prices extended losses after
the surprisingly strong data on August manufacturing reinforced
the impression from Chinese data that the global economy was
more resilient than feared. []
Concerns over the pace of U.S. growth were the major driver
of gold's push higher in earlier trade, analysts said.
Deutsche Bank analyst Daniel Brebner said such fears were
leading to "a growing acceptance that if conditions remain poor
or deteriorate further, the Fed will move to support growth."
"There is an expectation that deflationary risk is being
actively mitigated, and that the risk longer term is
increasingly one of inflation," he said.
ETF HOLDINGS RISE
On the investment side of the bullion market, holdings of
the major gold and silver exchange-traded products, which issue
securities backed by physical stocks of the precious metals,
rose on Tuesday, suggesting healthy investor interest.
The world's largest gold-backed exchange-traded fund, New
York's SPDR Gold Trust <GLD>, added another 4 tonnes of metal to
its stocks.
The SPDR reversed July's outflows to record a monthly gain
in its holdings in August. Swiss bank UBS said gold holdings of
the 12 ETFs it tracks rose 1.38 million ounces in August.
"While (that) was modest compared to May's 4.8 million
ounces and June's 2.6 million ounces, the trend of rising ETF
appetite is important for market sentiment, and indeed the
longevity of gold's current rally," it said in a note.
The largest silver ETF, the iShares Silver Trust, also
increased its holdings by more than 30 tonnes. []
Spot silver prices rose to their highest since mid-May on
Wednesday at $19.54, before steadying to $19.34.
Among other precious metals, platinum <XPT=> was at
$1,531.50 an ounce against $1,516.40.
Palladium <XPD=> was at $515.50 against $496.70. The metal
had risen more than 6 percent to peak at $527.50, its highest
since mid-May, due to earlier strength in gold prices and
weakness in the dollar.
Palladium is also broadly supported by its fundamentals,
traders said. "People still like palladium in the longer term,"
said one trader.
Elsewhere South Africa's National Union of Mineworkers said
8,000 workers at Northam Platinum <NHMJ.J> voted in favour of a
strike. The NUM said notice to strike at Northam will be served
Wednesday afternoon []
(Editing by Jane Baird)
