(Updates prices, adds details)

LONDON (Thomson Financial) - Gold extended earlier gains, climbing above 660 usd after weak US economic growth figures and high inflation numbers sparked hopes the metal will again be bought as a store of value in times of economic weakness.

The Commerce Department reported earlier that the US economy grew at a 0.6 pct annualised rate between January and March, down from the 1.3 pct gain estimated a month ago.

Moreover, its figures showed that the Fed's preferred measure of inflation, the core PCE price index, rose an annual 2.2 pct in the first quarter, up from the 1.8 pct increase in the fourth quarter.

"The dilemma continues for the Fed. Faced with a developing case of classic stagflation, the stewards of America's money are stuck between their resolve to raise rates as soon as the pace of inflation becomes an irritant, and the possible need to cut rates," said Kitco analyst John Nadelr.

He added, however, that for gold, "a stagflation scenario harks back to the good old' times of yesteryear. A full-on contraction punctuated by rising costs (energy and such) could be the very catalyst gold will look to, in its attempt to get back to the high(er) 600s".

At 2.41 pm, spot gold was quoted at 660.85 usd an ounce, above the 653.40 usd level seen in late New York trades yesterday.

Gold fell yesterday as the dollar rose against the euro, and as a decision by the Chinese authorities to triple the stamp duty or trading charge on equity market transactions, sparked an emerging markets rout.

However, the metal recovered today, ahead of the US data releases, amid a rebound in commodities, specifically base metals, as fears over the latest Chinese moves eased.

"Everything is recovering a little bit today, equities, base metals everything," said Scotia Mocatta analyst Simon Weeks.

On the near-term outlook, however, he remained cautious.

"Its looking a lot harder to achieve higher prices than to achieve lower prices. If it remains above 650 usd there'll be a degree of support but if it falls below that it will start targeting the 200-day moving average," he said.

In other precious metals, silver was up at 13.47 usd against 13.16 usd, platinum rose to 1,277 usd against 1,261 usd, while palladium was flat at 365 usd. maytaal.angel@thomson.com ss/bsd

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