* Gold up on weak dollar; inverse link set to strengthen
* Soaring grain prices fuel inflation worries
* Buy signal triggered for first time since April
* Coming up: U.S. nonfarm payrolls data on Friday
(Recasts, updates prices to market close, changes byline,
dateline, previous LONDON)
By Frank Tang
NEW YORK, Aug 5 (Reuters) - Gold prices rose on Thursday for a
seventh consecutive session as a weaker dollar and surging grain
prices lifted the metal's investment appeal.
Technical support also helped gold futures after a recent
price rally triggered the first buy signal in four months.
The usual inverse relationship between gold and the dollar
loosened earlier this year as extreme risk aversion benefited both
assets, but it has since shown signs of a resurgence.
(Graphic: http://link.reuters.com/qes53n)
"The weakening of the dollar helped. The inverse relationship
between gold and the dollar is beginning to work in the favor of
gold recently," said James Steel, chief commodity analyst at
HSBC.
Rising wheat prices after Russia said it would temporarily
halt grain exports due to the country's worst drought on record
also sparked some inflation worries, Steel said.
"Concern over the suspension of grain export from Russia and
escalating grain prices are triggering some concerns, which are
feeding into gold," he said.
Spot gold <XAU=> was at $1,195.65 an ounce at 3:02 p.m. EDT
(1902 GMT) against $1,194.60 late in New York on Wednesday. U.S.
COMEX December futures <GCZ0> settled up $3.40 at $1,199.30 an
ounce.
Gold benefited in earlier trade from gains in the euro <EUR=>
against the dollar after European Central Bank President
Jean-Claude Trichet said incoming third-quarter economic data
showed stronger-than-expected euro zone growth. []
"Gold has been trading like a currency, with the dollar," he
said. "That might be reversing if there is some sort of clarity
within the market. If we can avoid panic, I think things will
start going back to normal in that relationship," said Jeff
Pritchard, an analyst at Altavest Worldwide Trading.
A moving average convergence/divergence (MACD) analysis, which
focuses on exponential moving averages and closing prices,
revealed a buy signal earlier this week when the MACD moved above
the signal line on price graphs.
(Chart: http://link.reuters.com/nap53n )
"This is actually a real buy signal, the first time it's had
from under the zero line for a long time," said Rick Bensignor,
chief market strategist at investment banking group Execution
Noble LLC.
ALL EYES ON PAYROLLS
Trading volume was light ahead of key U.S. nonfarm payrolls
data due on Friday.
Economists polled by Reuters estimated that U.S. nonfarm
payrolls shed 65,000 jobs in July. []
"We've said for months that $1,250 might be the top. We
haven't really seen anything to make us depart from that in the
last month or so," said Citi analyst David Thurtell of gold
prices.
"We can get back up there if, say, worries emerge about the
U.S. fiscal situation."
There has been intense speculation in the fixed income markets
that the Federal Reserve will embark on a fresh bond-buying
program to ensure interest rates remain at their current low
levels for some time, an environment that would be beneficial to
gold which offers zero yield.
Holdings of the world's largest gold exchange-traded fund, the
SPDR Gold Trust <GLD>, fell to 1,281.8 tonnes, its seventh
straight decline in less than four weeks. Holdings hit a record
1,320.436 tonnes on June 29. []
Silver <XAG=> was up about 0.4 percent to $18.32 against
$18.25 in New York on Wednesday..
Platinum <XPT=> was at $1,570 an ounce versus $1,577, while
palladium <XPD=> was at $496 versus $494.10.
Prices at 3:13 p.m. EDT (1913 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCZ0> 1199.30 3.40 0.3% 9.4%
US silver <SIU0> 18.321 0.043 0.0% 8.8%
US platinum <PLV0> 1572.50 -13.70 -0.9% 6.9%
US palladium <PAU0> 496.05 -4.10 -0.8% 21.3%
Gold <XAU=> 1195.20 0.60 0.1% 9.0%
Silver <XAG=> 18.33 0.08 0.4% 8.8%
Platinum <XPT=> 1570.00 -7.00 -0.4% 7.1%
Palladium <XPD=> 496.00 1.90 0.4% 22.3%
Gold Fix <XAUFIX=> 1192.50 -3.00 -0.3% 8.0%
Silver Fix <XAGFIX=> 18.35 -15.00 -0.8% 8.0%
Platinum Fix <XPTFIX=> 1577.00 1.00 0.1% 7.6%
Palladium Fix <XPDFIX=> 497.00 2.00 0.4% 23.6%
(Additional reporting by Amanda Cooper and Jan Harvey in London,
and Lewa Pardomuan in Singapore; editing by Jim Marshall)
