(Updates with comment, refreshes prices)
* Gold at second successive record
* U.S., European debt burdens in focus
* Thailand, Russia buy gold in June
By Amanda Cooper
LONDON, Aug 3 - (Reuters) - Gold hit a record for a second straight day on Wednesday, powered by deepening fears over the spread of the euro zone debt crisis, while the most recent batch of U.S. data did not dispel concern about the world's biggest economy.
The United States avoided an unprecedented debt default on Tuesday with a last-minute deal on raising the country's borrowing limit.
But credit ratings agencies are unconvinced over resilience of U.S. finances, especially as growth has been patchy enough to spark fresh market speculation about what policy measures the Federal Reserve might use to boost the economy.
The nervousness over the U.S. economy was compounded by the latest developments in Europe, where Italian bond yields rose to their highest in over a decade above 6 percent, a level widely viewed as unsustainable, adding to the lure of gold as a safe-haven investment.
Meanwhile, the International Monetary Fund's monthly report on central bank reserves showed Thailand, Russia and Kazakhstan, among others, added to their holdings of gold two months ago, prolonging the trend in the official sector to put more of their reserves into bullion rather than hard currencies.
Spot gold was last quoted at $1,668.06 an ounce, up
0.5 percent on the day at 1410 GMT, having hit a record
$1,672.65 earlier. U.S. gold futures
"The current fundamentals in the gold market are supportive of these higher prices. The key factors that have been driving investment demand for gold - concerns about sovereign debt burdens, the long-term value of certain reserve currencies and fear of persistent inflation - are likely to continue for the foreseeable future," said Tom Holl, co-manager of the BlackRock World Resources Fund.
Data on Wednesday showed U.S. private employers added more jobs than expected in July, though less than in June, but planned layoffs rose to a 16-month high, and the services sector grew at its slowest pace in 17 months.
In Europe, Italy sought political support from the European Union as its stocks and bonds came under fire, while the Spanish prime minister held crisis talks about the worrying spike in yields.
"If you look at the European bond markets, you will see yields on Italian and Spanish bonds are back above 6 percent, so this crisis, unfortunately, seems to be spreading to Italy and Spain, which is also potentially more serious than Greece, because they're much larger," said Jesper Dannesboe, senior commodities strategist at Societe Generale.
"Gold is reacting to this and that is the main driver right now," he said.
Further unnerving the financial markets was the Swiss National Bank's decision to cut rates to fight the strength of the currency , which set the price of gold in Swiss francs on course for its biggest one-day gain since May.
Further bolstering gold, the IMF data showed Thailand boosted its gold reserves for the third time in the last year, by 18.66 tonnes in June to 127.524 tonnes. Korea said earlier this week it bought gold for the first time in over 10 years in June and July.
Gold is set for a 17 percent gain in 2011, which would mark an eleventh successive year of price rises.
This increase has been driven largely by the U.S. Federal Reserve's ultra-low monetary policy and concern that slow growth and the burden to the economy from the country's debt could derail the recovery process of the last two years.
Gold is on course for its strongest quarterly performance since the second quarter of last year.
Holdings of gold in exchange-traded products rose for an eighth day, to their highest level this year, after an inflow of more than half a million ounces into the world's largest bullion-backed ETF, the SPDR Gold Trust , which is now showing a net inflow for the year for the first time.
"The lack of a decent gold pullback has left many investors feeling frustrated and patience for a better buying opportunity is now wearing quite thin, which is why gold has attracted very decent buying this week," said UBS strategist Edel Tully in a note, adding the size of the speculative position in U.S. gold futures posed a downside risk to gold.
"But given that these are not ordinary times, ordinary rules do not apply," she said, adding that the bank had raised its three-month price forecast to $1,850, from $1,600.
In other precious metals, silver hovered near three month highs, trading 1.9 percent higher on the day at $41.54 an ounce, while platinum and palladium fell.
Spot platinum was last down 0.6 percent at $1,780.99 an ounce, while palladium was down 2.1 percent, having released earlier gains, to trade at $804.97 an ounce. (Additional reporting by Rujun Shen in Singapore; Editing by Alison Birrane)