* Spot gold hits record high at $1,661.14/oz * Italy emerges as next hot spot in euro zone debt crisis * Spot gold could hit $1,679 - technicals * Coming up: U.S. factory orders, June; 1400 GMT (Adds comments, details; updates prices) By Rujun Shen SINGAPORE, Aug 3 (Reuters) - Gold hit a record high on Wednesday as investors made a beeline for bullion to shelter from the impact on financial markets of the deteriorating outlook for the global economy and Europe's worsening debt crisis. Spot gold rose to an all-time high of $1,661.14 in early Asian hours, hitting its ninth record in 16 trading sessions and up nearly 17 percent so far this year. It was trading at $1,657.88 by 0424 GMT, little changed from the previous close. U.S. gold GCcv1 gained nearly 1 percent to $1,660.6. It rose to a high of $1,664.2, just 30 cents off the record set on Tuesday. Gold priced in sterling and euro also reached historical highs. U.S. politicians completed a last-gasp deal to avoid a default on Tuesday, but there was little relief for markets as investors focused instead on how tighter fiscal policy could constrict growth of the world's largest economy. The size of the U.S. debt remained a concern for ratings agency Moody's. Moody's retained its triple-A rating for the United States' but assigned a negative outlook to it, underscoring the threat of a future downgrade that would drive up the cost of borrowing and could slow future growth. "People are gravely concerned over government credit and the fact that the U.S. doesn't seem to be offering satisfying measures to assure fiscal positions and there is the sense that it will ultimately have some kind of real consequences in the markets," said a Singapore-based trader. "We are seeing a fairly large scale of capital flight not just out of the dollar, but out of other currencies as well. The precious metals market has emerged as an instrument of default, no pun intended." Gold jumped 2.6 percent in the previous session, its biggest gain since early November just after the U.S. Federal Reserve launched a second round of government debt purchases, or quantitative easing. Technical analysis suggested that gold's bull run might extend to $1,679, said Reuters market analyst Wang Tao. South Korea's central bank said on Tuesday it spent more than $1 billion in its first gold purchase in more than a decade, joining the trend among central banks to diversify their foreign reserves amid global growth uncertainties. Holdings in the SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, jumped 1.4 percent to 1,281.76 tonnes, highest since end of last year. "The momentum in gold in the short term will continue to run strong, supported by worries about global economic growth, gold purchase by South Korea's central bank announced yesterday and rising in SPDR Gold Trust holdings," said Li Ning, an analyst at Shanghai CIFCO Futures. Li expected gold to test $1,680 in the short term. The latest weak data from the United States, following a batch of dour manufacturing surveys on Monday, added to fears over a deteriorating global economy. U.S. consumer spending dropped in June for the first time in nearly two years and incomes barely rose. Concerns about spreading sovereign debt crisis in the euro zone underpinned gold's strength. "It seems to me that it hasn't reached the peak, and what the authorities have tried to do is postponing rather than preventing what the markets want to do with government credit in euro zone and maybe in the U.S.," said the Singapore-based trader. Italy found itself dragged deeper into the euro zone debt crisis on Tuesday, prompting emergency consultations in Rome and among European capitals. Yields on Italian and Spanish bonds hit their highest levels in 14 years, with five-year Italian yields reaching the same level as Spain's in a sign Rome is overtaking Madrid as a key focus of investors' concern about debt sustainability. Precious metals prices 0424 GMT Metal Last Change Pct chg YTD pct chg Volume Spot Gold 1657.88 -1.37 -0.08 16.80 Spot Silver 40.78 -0.02 -0.05 32.15 Spot Platinum 1792.49 1.69 +0.09 1.41 Spot Palladium 825.79 3.21 +0.39 3.29 TOCOM Gold 4123.00 78.00 +1.93 10.57 90851 TOCOM Platinum 4510.00 5.00 +0.11 -3.96 4654 TOCOM Silver 101.10 2.40 +2.43 24.81 642 TOCOM Palladium 2066.00 -10.00 -0.48 -1.48 176 Euro/Dollar 1.4211 Dollar/Yen 77.29 TOCOM prices in yen per gram. Spot prices in $ per ounce. COMEX gold and silver contracts show the most active months (Additional reporting by Manolo Serapio Jr. in SINGAPORE; Editing by Himani Sarkar)

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