* Gold rises on concerns about euro zone, global growth
* Renewed euro debt fears help after Franco-German meet
* Flight to safer investments on weak German growth data
* Coming up: U.S. Producer prices Wednesday (Recasts, updates comment, market activity)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Aug 16 (Reuters) - Gold prices rose 1 percent Tuesday as investors turned to the safe haven after comments by the leaders of France and Germany about closer euro zone integration and deficit limits failed to ease worries about that region's debt problems.
Sluggish German growth data added to recession fears and as well as to gold's appeal.
Bullion extended gains on renewed fears about a European debt crisis after French President Nicolas Sarkozy and German Chancellor Angela Merkel stopped short of increasing the euro zone rescue fund but vowed to defend the single currency.
Gold had already benefited from a flight to safety as global equity markets were trading sharply lower after data showed Germany's gross domestic product expanded just 0.1 percent from April to June versus the previous quarter.
Some analysts said that the metal was highly overbought and long due for a pullback after it gained as much as 13 percent in the last 15 days.
"At the end of the day, it (Sarkozy-Merkel news) is going to put worries back into the market about the euro and euro zone that may have been quieting down. It's going to add additional volatility into the gold market," said Frank McGhee, head precious metals trader at Integrated Brokerage Services LLC.
McGhee said that the Franco-German plan is likely to sharply weaken the euro before any significant achievements.
Spot gold
U.S. gold futures for December delivery
Gold was also underpinned as Wall Street remained lower even as rating agency Fitch affirmed its triple-A rating on the United States, in blatant disagreement with rival Standard & Poor's.
However, market watchers said that gold is vulnerable for a severe pullback after the metal has rallied nearly $300 in the last 1.5 months.
"There is little doubt in my mind that gold is at a bubble which means that it will burst at any time," said Erik Davidson, deputy chief investment officer for Wells Fargo Private Bank, which has $210 billion assets under management.
Davidson said he compared gold's rally to the recent U.S. housing and technology stock bubbles. He added that gold's correction could easily be at least 30 percent.
PAULSON STAYS PUT WITH GOLD
Buying sentiment also improved on news the largest gold fund players, including hedge fund titan John Paulson, stuck with their bullion bets in the second quarter, opting not to follow George Soros who further reduced his gold ETF holdings. [ID:nN1E77E1TB]
Famed gold bull Paulson held his ground with his $4.6 billion stake in the large gold exchange-traded fund SPDR Gold Trust in the second quarter, according to 13-F filings with the U.S. Securities and Exchange Commission that provide the best insight into where hedge funds are placing their bets.
Soros, who dumped almost his entire $800 million stake in
bullion in the first quarter, further reduced his investment in
SPDR Gold Trust
Among other precious metals, silver
SETTLE CHNG CHNG VOL US Gold DEC 1785.00 27.00 1.5 1763.60 1789.80 148,770 US Silver SEP 39.819 0.512 1.3 39.290 40.175 39,685 US Plat OCT 1818.10 20.90 1.2 1810.00 1828.00 6,964 US Pall SEP 756.50 10.15 1.4 741.85 758.55 3,207 Gold 1784.99 19.99 1.1 1761.75 1786.20 Silver 40.050 0.210 0.5 39.320 40.120 Platinum 1813.50 10.05 0.6 1808.50 1820.75 Palladium 754.22 9.92 1.3 744.45 756.00 TOTAL MARKET VOLUME 30-D ATM VOLATILITY
CURRENT 30D AVG 250D AVG CURRENT CHG US Gold 161,064 238,789 185,629 26.31 1.27 US Silver 52,912 70,990 60,257 41.93 -2.57 US Platinum 7,050 6,367 7,720 22 2.00 US Palladium 4,563 4,400 4,167 (Reporting by Frank Tang; Editing by Bob Burgdorfer)