PRECIOUS-Gold flirts with $1,000 after six-month high

* Gold steady at $990 after biggest two-day gain since
March

* Uncertainty about equities spurs safe-haven buying

* After breaking range, third-time lucky to hold $1,000?

* Eyes on European stocks, U.S. jobs data for next push

By Miho Yoshikawa

TOKYO, Sept 4 (Reuters) - Gold hovered a hair below $1,000
an ounce on Friday, consolidating the biggest two-day gain
since March after a mix of inflation anxiety, a retreat from
risk assets and a technical break stoked renewed investor
interest.

The biggest one-day percentage rise since March in the SPDR
Gold Trust, the largest gold-backed exchange-traded fund,
underscored the fresh burst of investor demand for a safety
hedge against a halting economic recovery and the risk that
this summer's stock market rally may be unsustainable.
[GOL/SPDR]

Spot gold XAU= dipped 0.1 percent to $989 an ounce by
0617 GMT, pausing after a 5 percent gain over the past two days
pushed it to a six-month peak of $997.20 on Thursday.

U.S. gold futures for December delivery GCZ9, now at
$992.70, came even closer to four digits with a session peak of
$999.50 per ounce on Thursday, putting it on course for its
biggest weekly gain since late April.

Gold, traditionally a port of refuge during economic
storms, broke out of two months of range-bound trade this week,
with investors seeking out a fresh play after global share
prices reversed course and a rally in other commodities
stalled.

"When the outlook is uncertain, money tends to flow to the
market which is showing a clear trend ... in this case precious
metals led by gold," sais Shuji Sugata, a manager at Mitsubishi
Corp Futures & Securities. He said trend-following funds had
jumped on the bullion bandwagon in the past days.

Although it has broken out of its $930-$970 channel, gold
has yet to crest the four-digit mark for the first time since
February, a mark that has proven repeatedly difficult to crack.

Bullion has failed to hold gains above the $985 a tonne
mark all four times it has topped that level since marking a
record $1,030.80 in March of 2008, and some warned it may do so
again.
here

"It is quite possible that the gold price will breach the
$1,000/oz level in the near term... However, we would not
expect the gold price to hold there," Commonwealth Bank of
Australia commodities analyst David Moore said in a report.

"Rather, we expect the gold price to trend lower over the
period to end-2009 and to continue to drift lower over the
course of 2010 as investor interest wanes."

U.S. December gold futures last approached $1,000 on June
3, when the contract rose to a peak of $993.60 as gold's
traditional inverse relationship with the dollar appeared to
reassert itself, but it tumbled the next day in heavy
profit-taking.

STOCK CORRELATION REVERSAL

Gold is also seen as a hedge against inflation, a factor
that is gaining increasing prominence as central banks keep
pumping money into the financial system to jolt the economy,
although its latest action appeared more closely tied to stock
markets, with the close summer correlation suddenly reversing
this week.

For a graphic showing the gold/Dow Jones correlation
click:
here

"Gold had a positive correlation with stocks for the last
three months, but now that there are signs of weakness in
stocks investors are turning to the metal in flight-to-quality
buying," said Masayo Kondo, president of Fisco Commodity Ltd.

U.S. stocks fell for four days running before Thursday's
late day rally snapped the losing streak [.N], with U.S. retail
sales in August coming in stronger than expected even if still
down 2.9 percent on the year.

Regional stocks were mixed on Friday, with Japan's Nikkei
average .N225 edging down 0.3 percent in thin, see-saw trade
with traders reluctant to buy ahead of key U.S. jobs data,
while Chinese stocks rose 0.6 percent. [.T] [ID:nHKG315127]

The key economic number this week comes up later on Friday
when U.S. non-farm payrolls data is released, with employers
expected to cut jobs by the smallest amount in a year.
[ID:nN01485399]

Reflecting the recent rush of investor interest, the SPDR
ETF said holdings rose 14.65 tonnes or 1.4 percent to 1,078.01
tonnes as of Sept. 3 XAUEXT-NYS-TT, but were still off the
peak 1,134.03 tonnes on June 1.

Investors lost interest in the fund for about a month from
mid-July when holdings fell about 3 percent as worries about
inflation eased.

Precious metals prices at 0541 GMT
Metal Last Change Pct chg YTD pct chg
Turnover
Spot Gold 990.70 0.60 +0.06 12.56
Spot Silver 16.08 0.00 +0.00 42.05
Spot Platinum 1260.50 11.00 +0.88 35.25
Spot Palladium 290.50 1.50 +0.52 57.45
TOCOM Gold 2960.00 48.00 +1.65 15.04
54924
TOCOM Platinum 3768.00 86.00 +2.34 42.08
14228
TOCOM Silver 478.40 18.40 +4.00 49.83
470
TOCOM Palladium 873.00 20.00 +2.34 58.73
370
Euro/Dollar 1.4259
Dollar/Yen 92.61
TOCOM prices in yen per gram, except TOCOM silver which is
priced in yen per 10 grams. Spot prices in $ per ounce.
(Additional reporting by Risa Maeda; Editing by Jonathan
Leff)