Gold rises on equities, commods rallies, China data

An employee picks up a gold bar at the Austrian Gold and Silver Separating Plant 'Oegussa' in Vienna August 26, 2011.

NEW YORK (Reuters) - Gold rose about 1.5 percent on Friday, boosted by sharp rallies in equities and commodities after data showed that China's economic growth, though slower, was stronger than some had expected.

Friday's rally was the largest one-day gain in three weeks, and it lifted the precious metal to a weekly gain from the loss column.

China's growth rate slowed for a sixth successive quarter to its weakest pace in more than three years, but some economists had anticipated worse because of signs of a slowdown in the United States and Europe.

Bullion, which has been particularly sensitive to central banks' monetary policies, also benefited from perceptions that the Chinese GDP data could open the door for further easing.

"It does indicate that the People's Bank of China has to promote more liquidity via further rate cuts or potential fiscal programs that make sure growth does not fall below these levels," said Mark Luschini, chief investment strategist at broker-dealer Janney Montgomery Scott, which has $54 billion in assets.

Spot gold rose 1.2 percent at $1,589.63 an ounce by 2:42 p.m. EDT (1842 GMT)

U.S. gold futures for August delivery settled up $26.70 an ounce at $1,592. The pace of trading was slightly slower than usual, as volume was 20 percent below its 30-day norm, preliminary Reuters data showed.

China, considered an engine of the global economy, said its year-on-year growth was 7.6 percent in the second quarter, below the 8 percent level that in previous downturns has triggered a robust response from policymakers.

A nearly 2 percent rally on Wall Street and sharp gains in crude oil and grains amid a weaker dollar also lifted gold, which has largely moved in tandem with perceived riskier assets this year.

Gold held gains after data showed U.S. consumer sentiment fell in early July to its lowest level in seven months, while producer prices rose only slightly last month, suggesting inflation pressures remain muted and leaving the door open for more easing by the U.S. Federal Reserve.

INDIAN BUYERS RETREAT

On the physical markets, gold traders in major consumer India took to the sidelines on Friday as prices recovered, with a weak rupee making the metal more expensive for local buyers. Record local prices have weighed heavily on demand this year.

Holdings of gold-backed exchange-traded funds, which issue securities backed by physical stocks of the metal, dropped for a third session on Thursday.

The largest gold-backed ETF, SPDR Gold Trust, has seen an outflow of nearly 10 metric tons so far in July.

Among other precious metals, silver was up 0.6 percent at $27.32 an ounce, platinum was up 1.2 percent at $1,425.75 an ounce, and spot palladium was up 1.3 percent at $580.75 an ounce.

(Additional reporting by Jan Harvey in London; Editing by Alden Bentley)