LONDON, Sept 14: Gold bounced back to hit a 16-month high in late business on Friday as the dollar fell to near record lows versus the euro after the release of US data.It has jumped $75 or 12 per cent in a month after sinking to a 7-week low of $641.10 in mid-August, when investors sold gold and other metals for cash to cover margin calls on losses arising from a meltdown in the US subprime mortgage market.

Spot metal fell as low as $703.80 an ounce before rebounding to $717 -- a 16-month high for the second time this week. It was quoted at $715.65/716.35 by 1427 GMT, against $708.90/709.70 late on Thursday in New York.

The metal is closing in on a 26-year high of $730 hit in May last year and is roughly $135 below its all-time high of $850, fixed in London on January 21, 1980.

Michael Kempinski, senior metals trader at Commerzbank, said that fears about a general economic crisis were attracting investors, funds and private investors into gold.

There will be some space for consolidation, but in general probably it will test $725 next week as the dollar weakness might continue, he said, adding gold’s role as a safe-haven asset was getting re-established.

Gold traditionally has been used by investors as protection against economic and political uncertainty.

But in recent months it behaved much like other financial assets because of the growing role of commodities in diversified portfolios.

Demand for the greenback fell as the reports added to worries about the fallout from the US subprime mortgage crisis Generally, a lot of factors still remain quite positive for gold, especially the dollar, oil prices and general macro-economic concerns. The overall environment is still very positive, said Suki Cooper, analyst at Barclays Capital.

Most of the 10 market participants polled by Reuters this week saw gold hitting $730 at some point before end-2007, with a top forecast of $740 and some looking for the move to come as early as next month.

In industry news, Japan’s Daihatsu Motor Co Ltd said it had developed a technology to make fuel cells without platinum, the precious metal used in the electrolyte process in existing hydrogen-based fuel cells.

In other metals, platinum was at $1,297/1,302, up $1 from its close in New York, while palladium was flat at $330/333. Silver rose to $12.72/12.77 an ounce from $12.51/12.56.—Reuters