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PRECIOUS-Gold firm near lifetime high, econ worries linger

Published 08/09/2011, 11:22 PM
Updated 08/09/2011, 11:24 PM
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* Spot gold eyes $1,796 -technicals

* Coming Up: U.S. Federal budget, July; 1800 GMT (Updates prices, adds quotes)

By Lewa Pardomuan

SINGAPORE, Aug 10 (Reuters) - Gold ticked higher on Wednesday, hovering near a lifetime high around $1,778 an ounce struck in the previous session, but further gains could be capped by a rebound in equities after the U.S. Federal Reserve's vow to keep rates near zero.

Stocks bounced in Asia after U.S. shares jumped on the Federal Reserve's unprecedented pledge to keep interest rates near zero for at least two years, although the move confirmed fears the U.S. economy will remain weak for far longer than previously forecast.

Gold added $11.89 to $1,755.29 an ounce by 0258 GMT, having hit a record at $1,778.29 on Tuesday, in its biggest three-day rally since the financial crisis in late 2008 after equities plunged on fears over the threat to economic growth from the U.S. and euro debt crises.

"Generally speaking, the panic is subsiding for the moment. I would expect that (gold) will consolidate at these levels for a while before we get any sort of clear idea of the sort of next major moves," said Citigroup analyst David Thurtell.

"I think there are enough concerns about sovereign debts and weakening growth, that people will buy dips, so it should remain supported."

U.S. December gold futures rose $24.4 to $1,767.4 an ounce, within sight of Tuesday's record of about $1,782 an ounce.

Tracking strong global prices, the most active gold contract on the Tokyo Commodity Exchange, June 2012 , hit a record for a second consecutive day at 4,408 yen a gram.

The Fed pledged to hold benchmark rates at rock-bottom lows until mid-2013, and opened the door to other tools to support growth, saying that U.S. economic growth was proving considerably weaker than expected.

Global stock markets had been tumbling since the start of August on fears the United States would slide back into recession after a downgrade of the U.S. credit rating on Friday, and on the ever-expanding euro zone debt crisis.

MSCI's all-country world stock index was about 17 percent below its May peak on Wednesday, after slipping as far as 20 percent, the generally accepted definition of a bear market, on Tuesday.

Premiums for gold bars remained steady in Asia, although jewellers were on the sidelines as they closely watched movements in the equities markets.

"We'll wait and see if stocks markets will continue to stabilise, because if it will, then gold will drop down a bit," said a physical dealer in Hong Kong.

"But I think there's no change in sentiments for gold. Interest rates in the U.S. will be kept low in the next two years and it should benefit gold for the time being."

High bullion prices turned off demand in main consumer India, but a correction could prompt bargain hunting from jewellers as the busy wedding season resumes later this month.

Gold jewellery is an essential part of the dowry basket parents give daughters at weddings.

In the energy market, Brent crude rose $2 after the Fed's promise to extend near-zero interest rates for two more years weighed on the dollar and helped reverse a steep slump in oil.

Precious metals prices 0258 GMT Metal Last Change Pct chg YTD pct chg Volume Spot Gold 1755.29 11.89 +0.68 23.66 Spot Silver 38.34 0.71 +1.89 24.24 Spot Platinum 1752.50 3.90 +0.22 -0.85 Spot Palladium 745.25 11.30 +1.54 -6.79 TOCOM Gold 4343.00 -5.00 -0.11 16.47 85622 TOCOM Platinum 4375.00 86.00 +2.01 -6.84 9473 TOCOM Silver 94.50 -1.90 -1.97 16.67 858 TOCOM Palladium 1865.00 96.00 +5.43 -11.06 353 COMEX GOLD DEC1 1631.20 15.00 +0.93 14.76 136930 COMEX SILVER SEP1 40.11 0.31 +0.78 29.63 44407 Euro/Dollar 1.4347 Dollar/Yen 76.84 TOCOM prices in yen per gram. Spot prices in $ per ounce. COMEX gold and silver contracts show the most active months

(Reporting by Lewa Pardomuan; Editing by)

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