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Gold at record as debt worries mount

* Gold at second successive record

* U.S., European debt burdens in focus

* Thailand, Russia buy gold in June

LONDON, Aug 3 - (Reuters) - Gold hit a record for a second straight day on
Wednesday, driven by deepening fears over the spread of the European
debt crisis and its impact on regional growth, while data showed a number
of central banks bought gold in June.

The United States managed to avert an unprecedented debt default on
Tuesday after lawmakers agreed to raise the country's borrowing limit.
But, the focus turned to credit ratings agencies, which have warned the
country could lose its top-notch rating as its finances remain fragile.

The nervousness over the U.S. economy was compounded by the latest
developments in Europe, where Italian bond yields rose to their highest in
over a decade above 6 percent, a level widely viewed as unsustainable,
adding to the lure of gold as a safe-haven investment.

Meanwhile, the International Monetary Fund's monthly report on central
bank reserves showed Thailand, Russia and Kazakhstan, among others,
added to their holdings of gold two months ago, prolonging the trend in
the official sector to put more of their reserves into bullion rather than hard
currencies.

Spot gold was last quoted at $1,665.65 an ounce, up 0.4 percent on the day
at 1125 GMT, having hit a record $1,672.65 earlier. U.S. gold futures GCv1
were last up 1.5 percent at $1,669.50 an ounce.

"If you look at the European bond markets, you will see yields on Italian
and Spanish bonds are back above 6 percent, so this crisis, unfortunately,
seems to be spreading to Italy and Spain, which is also potentially more
serious than Greece, because they're much larger," said Jesper
Dannesboe, senior commodities strategist at Societe Generale.

"Gold is reacting to this and that is the main driver right now," he said.

Further unnerving the financial markets was the Swiss National Bank's
decision to cut rates to fight the strength of the currency , which set the
price of gold in Swiss francs on course for its biggest one-day gain since
May.

THAILAND BUYS

The IMF data showed Thailand boosted its gold reserves for the third time
in the last year, by 18.66 tonnes in June to 127.524 tonnes. Korea said
earlier this week it bought gold for the first time in over 10 years in June
and July.

Gold is set for a 17 percent gain in 2011, which would mark an eleventh
successive year of price rises.

This increase has been driven largely by the U.S. Federal Reserve's
ultra-low monetary policy and concern that slow growth and the burden to
the economy from the country's debt could derail the recovery process of
the last two years.

Gold is on course for its strongest quarterly performance since the second
quarter of last year.

Holdings of gold in exchange-traded products rose for an eighth day, to
their highest level this year, after an inflow of more than half a million
ounces into the world's largest bullion-backed ETF, the SPDR Gold Trust ,
which is now showing a net inflow for the year for the first time.

"The lack of a decent gold pullback has left many investors feeling
frustrated and patience for a better buying opportunity is now wearing
quite thin, which is why gold has attracted very decent buying this week,"
said UBS strategist Edel Tully in a note, adding the size of the speculative
position in U.S. gold futures posed a downside risk to gold.

"But given that these are not ordinary times, ordinary rules do not apply,"
she said, adding that the bank had raised its three-month price forecast to
$1,850, from $1,600.

In other precious metals, silver hovered near three month highs, trading
0.2 percent higher on the day at $40.88 an ounce, while platinum and
palladium fell.

Spot platinum was last down 0.6 percent at $1,780.00 an ounce, while
palladium was down 2.5 percent, having released earlier gains, to trade at
$801.83 an ounce.