* Weak U.S. manufacturing data boosts gold, hits Wall St
* Eyes on U.S. lawmakers vote on debt ceiling deal
* Gold vulnerable due to deflation fears, slowdown
* Coming up: U.S. House vote on debt bill Monday evening (Recasts, updates prices, market activity)
By Frank Tang
NEW YORK, Aug 1 (Reuters) - Gold ended lower on Monday, but safe-haven buying by investors jittery about slow U.S. manufacturing growth limited losses after a U.S. debt deal shoved the precious metal sharply off record levels.
In early trade, bullion dropped more than 1 percent as global markets showed initial signs of relief that the United States appeared to be dodging default. But the stock market rally soon fizzled, and gold pared losses as investors shied away from risky trades, fearing the country might still lose its triple-A credit rating.
Volume was down from last week, with some traders taking to the sidelines as Congressional leaders scrambled for enough votes to push through a deal to raise the U.S. borrowing limit on the eve of the the Aug. 2 deadline.
"Investors have switched their emphasis from the debt deal to a possible U.S. credit rating downgrade, bad manufacturing data and the not-optimistic job report coming out later this week," said Phillip Streible, senior market strategist with futures broker MF Global.
"Gold should be bid up in the near term as investors are still looking for a safety with the bad economic outlook."
Spot gold
Most-active U.S. December gold futures
Spot silver
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Coverage on U.S. debt crisis [ID:nTOPNOW4]
Gold's run to record on US woes [ID:nL6E7ID1SS]
CFTC commodity positions report:
http://r.reuters.com/buv87r
INSTANT VIEW on debt deal [ID:nL3E7J103X]
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Gold gained 8.5 percent last month, its second-best monthly rise since 2009, as fears that a euro-zone debt crisis spreading to Spain and Italy and frantic talks to avert a U.S. default prompted investors to buy a safe haven.
The precious metal remains vulnerable for a pullback if investors perceive weak economic data and U.S. budget cuts as deflationary, said Jeffrey Sherman, commodities portfolio manager at DoubleLine Capital, which oversees $13 billion in assets.
Sherman said gold prices could be volatile, with investors undecided about whether to worry more about disappointing U.S. economic data or a possible ratings downgrade or default.
Safe-haven buying in gold accelerated as U.S. stocks were heading for a sixth consecutive loss after a strong opening as relief over Washington's debt deal faded following a weak reading on the manufacturing sector.
U.S. manufacturing grew at its slowest pace in two years in July as new orders contracted, a troubling development for the faltering economy. [ID:nN1E7700MM]
On Friday, gold rallied after U.S. government data showed the economy stumbled in the first half of 2011 and came close to contracting in the first quarter. Some investors worried about the risk of a recession that could prompt the Fed to use more stimulus, feeding inflation and boosting gold price
U.S. DEBT DEAL VOTES EYED
Bullion investors will watch votes later Monday in the U.S. Congress on a plan to cut government spending, form a congressional committee to recommend a deficit-reduction package and raise the U.S. borrowing limit through 2013. [ID:nN1E76U0F5]
"There is some short-term relief as the risk of an imminent default (for the United States) does seem to have been avoided," said Caroline Bain, senior commodities economist at the Economist Intelligence Unit.
"But very soon the market will start to factor in that there isn't that much being done with the fiscal deficit and concerns will re-emerge," Bain said
The dollar hit a record low against the Swiss franc and a 4-1/2 month trough versus the yen on Monday as optimism about the U.S. evading a default were swiftly outweighed by fears about the government's fiscal condition and a devastating credit ratings downgrade.
Bullion was pressured as the greenback, however, was 1 percent higher against the euro due to ongoing jitters about the euro zone's debt crisis.
Debt troubles in the euro zone were on investors' radar screens, after ratings agency Moody's put Spain on review for possible downgrade Friday.
Platinum group metals tracked other industrial commodities
lower. Platinum
SETTLE CHNG CHNG VOL US Gold DEC 1621.70 -9.50 -0.6 1608.20 1634.50 141,516 US Silver SEP 39.309 -0.797 -2.0 39.040 40.070 42,674 US Plat OCT 1794.60 9.30 0.5 1779.00 1804.90 4,692 US Pall SEP 829.50 1.80 0.2 826.50 850.20 4,166 Gold 1620.49 -6.10 -0.4 1609.76 1631.66 Silver 39.300 -0.520 -1.3 39.060 40.010 Platinum 1790.24 -20.76 -1.1 1781.50 1799.00 Palladium 826.75 -13.25 -1.6 829.02 846.75 TOTAL MARKET VOLUME 30-D ATM VOLATILITY
CURRENT 30D AVG 250D AVG CURRENT CHG US Gold 154,001 191,819 178,116 18.65 0.16 US Silver 45,236 73,274 61,435 40.85 0.50 US Platinum 4,750 7,408 7,354 22 2.00 US Palladium 4,434 3,373 3,847 (Additional reporting by Harpreet Bhal in London; Editing by David Gregorio)