PRECIOUS-Gold rises as global recession fears lift safe-haven appeal

* Silver gains nearly 2%

* China July industrial output growth weakest in 17 years

* Germany’s economy contracts in the second quarter (Updates prices)

Aug 14 (Reuters) - Gold rose over 1% on Wednesday as an inverted U.S. Treasury yield curve and weak euro zone data stoked fears of a global economic recession and drove investors toward safe-haven bullion.

Spot gold rose 1.1% to $1,517.88 per ounce, as of 2:03 p.m. EDT (1803 GMT), after dipping as much as 2% in the previous session.

U.S. gold futures settled up 0.9% at $1,527.80.

The U.S. Treasury yield curve inverted for the first time since 2007, when the U.S. subprime mortgage crisis was gathering pace, in a sign that the world’s biggest economy could be headed for a recession.

“With major economies in the euro zone reporting negative growth, it’s possible we will see a recession. So for gold in particular, it increases expectations of what the U.S. Federal Reserve will do in terms of easing” interest rates, said Jeff Klearman, portfolio manager at GraniteShares.

“Nothing in the immediate future is working against gold; there may be bouts where gold retraces, but the trend is upward.”

The euro zone’s GDP barely grew in the second quarter as economies across the bloc lost steam and the largest, Germany, contracted due to a global slowdown driven by trade disputes and uncertainty over Brexit.

This came after data showed growth in China’s industrial output in July rose at the slowest pace in more than 17 years.

The renewed recession risks drove a slump in global stocks.

“Geopolitics also remains close to the front burner of the marketplace, which is also supporting gold and silver,” Jim Wyckoff, senior analyst with Kitco Metals, wrote in a note, adding “the civil unrest in Hong Kong remains in focus among traders and investors worldwide.”

In a volatile session on Tuesday, gold initially jumped to an over six-year high of $1,534.31 due to the unrest in Hong Kong and a slump in Argentina’s peso, before reversing to fall 2% on signs of a thaw on the trade front.

Investors awaited the U.S. Federal Reserve’s annual conclave in Wyoming next week for clues on the future trajectory of interest rates.

SPDR gold trust holdings, meanwhile, saw an outflow of about 11 tonnes - the biggest since early April - on Tuesday from Monday, when holdings were at the highest in over a year.

Silver gained 1.7% to $17.25 per ounce, after hitting its highest since January 2018 on Tuesday.

Platinum slipped 0.7% to $845.89 an ounce, while palladium dipped 1.7% to $1,430.56.

While the palladium market is likely to remain in deficit this year and next, “liquidity has returned and is shaking off froth,” INTL FCStone analyst Rhona O’Connell said in a research note. (Reporting by Sumita Layek in Bengaluru, editing by G Crosse and Richard Chang)