PRECIOUS-Gold holds gains after early rally toward 2012 high

* Gold up slightly for week, posts five-week rally
* US gold futures' open interest hit one-year high again
* Hedge fund manager's bullish call on gold ups sentiment
* Coming up: U.S. Chicago, Dallas manufacturing indexes Mon.

(Updates market activity)
By Frank Tang
NEW YORK, Sept 21 (Reuters) - Gold rose to within a whisker
of its 2012 high on Friday as technical momentum and recent
stimulus efforts by major central banks around the world
prompted bullion investors to boost bullish bets.
Bullion priced in euro terms hit a record high
earlier in the session, but gains were later pared by profit
taking. The metal posted a slim gain for the week for its fifth
consecutive weekly rise.
A positive "golden cross" formed on technical charts and a
bullish call made by well-known hedge fund manager Ray Dalio for
gold ownership further fed market sentiment for bullion.
Traders said heavy buying of call options at high strike
prices could extend the metal's recent rally as open interest in
U.S. gold futures hit a one-year high for a second straight day.
"There are a lot of hedge funds that bought call options a
week or two ago. There have been big buyers after the Fed has
committed to the monetization of debt," said Jeffrey Sherman,
commodity portfolio manager at DoubleLine Capital LP which
manages $45 billion in assets.
Investors have been aggressively buying short-dated call
options with the $2,000 an ounce strike price, Sherman said.
Spot gold was up 0.3 percent at $1,772.96 an ounce by
3:20 p.m. EDT (1920 GMT) after hitting a high of $1,787.20,
within reach of the 2012 high of $1,790.30.
U.S. COMEX gold futures for December delivery settled
up $7.80 at $1,778 an ounce, with trading volume surpassing its
250-day average, preliminary Reuters data showed.
COMEX futures' open interest, which measures the total
outstanding long and short contracts, rose to a one-year high at
483,107 lots as of Thursday. Open interest of U.S. gold futures
has gained about 25 percent in the past 30 days.
New longs, or investors who recently bought futures at
higher prices, could lead to a spike in volatility if they opt
to abandon their losing bets in a gold pullback, traders said.
Next Tuesday's COMEX October expiration also increased
choppiness.

MORE RALLY ON GOLDEN CROSS?
Earlier this week, gold's 50-day moving average (DMA) broke
above its 200 DMA, which marked a golden cross in technical
analysis, indicating bullion's intermediate and longer-term
momentum is getting increasingly bullish.
(Golden cross graphic: r.reuters.com/tas72t)
The previous long-lasting golden cross on bullion charts was
formed on Feb. 6, 2009, and gold prices had surged 11 percent in
the following 11 sessions.
Prominent hedge fund manager Ray Dalio said investors should
benefit from gold ownership as a hedge against the adverse
effects of money printing by central banks.
"I think gold should be a portion of every one's portfolio
to some degree because it diversifies the portfolio. It is the
alternative money," Dalio, who runs the $120 billion hedge fund
Bridgewater Associates, said on CNBC Television on Friday.
Among other precious metals, silver inched down 0.1
percent at $34.57 an ounce. Platinum climbed 0.7 percent
to $1,631.75 an ounce, while palladium rose 1.1 percent
to $667.25.
3:20 PM EDT LAST/ NET PCT LOW HIGH CURRENT
SETTLE CHNG CHNG VOL
US Gold DEC 1778.00 7.80 0.4 1769.10 1790.00 168,352
US Silver DEC 34.638 -0.044 -0.1 34.365 35.260 60,794
US Plat OCT 1637.60 13.70 0.8 1623.80 1647.00 12,589
US Pall DEC 671.55 10.45 1.6 661.15 678.45 3,277

Gold 1772.96 5.77 0.3 1767.01 1787.20
Silver 34.570 -0.020 -0.1 34.350 35.150
Platinum 1631.75 10.75 0.7 1626.80 1642.74
Palladium 667.25 7.15 1.1 663.50 675.25

TOTAL MARKET VOLUME 30-D ATM VOLATILITY
CURRENT 30D AVG 250D AVG CURRENT CHG
US Gold 183,819 146,406 183,741 17.31 -0.25
US Silver 65,496 57,663 53,514 29.16 -1.53
US Platinum 18,371 18,609 9,341 23.58 0.12
US Palladium 3,293 8,364 4,657

(Additional reporting by Jan Harvey in London; Editing by Bob
Burgdorfer and Sofina Mirza-Reid)