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LONDON, Aug 2 (Reuters) Gold gained on Thursday as world stock markets rose and credit markets stabilised, but dealers said the metal might be confined to a range in the near term.

A surge in investment in a U.S.-listed gold exchange traded fund (ETF) to record highs indicated that investors were positive on gold's price outlook, they said.

Spot gold was quoted at $666.10/666.60 an ounce by 1258 GMT, compared with $664.10/664.90 late in New York on Wednesday, when prices fell as low as $659.

''Amongst the precious metals complex, we favour gold over the other metals,'' said John Reade, head of metals strategy at UBS Investment Bank.

''Firstly, long positioning has been largely eliminated from gold following the recent spike and retracement, whereas substantial long positions remain in platinum and palladium.

Secondly, should markets start to price in systemic risk, gold could benefit from safe haven buying.'' Gold, traditionally seen as a safe-haven asset, has recently been put in the same category as other commodities, which are considered riskier investments. It also becomes less attractive when interest rates rise as it is a zero-yielding asset.

''The market is waiting again for direction from the currencies,'' said James Moore, analyst at TheBullionDesk.com.

''For gold, we are in the summer months, and that's when physical buying is quite slow and prices tend to weaken. In the next four to six weeks, we are probably going to trade largely sideways,'' he said.

Major currencies steadied, as investors took a breather from the recent burst of credit and equity-driven volatility, and awaited direction from stocks and comments from the European Central Bank (ECB).

The euro and sterling were little changed after the Bank of England and ECB left rates on hold at 5.75 percent and 4 percent respectively. Wall Street's late rally on Wednesday triggered gains on Asian and European bourses Thursday.

RECORD HIGH GOLD ETF Gold held by StreetTRACKS gold ETF surged more than 10 tonnes to a record high of 506.69 tonnes on Thursday from a day earlier, data showed.

Japan's first exchange-traded fund tracking a gold price index was launched with initial assets of 5.096 billion yen ($43 million) on Thursday. In industry news, Newmont Mining Corp.

posted a second-quarter loss as it took a huge charge related to a write-down for the sale of its merchant banking operation and eliminating its gold hedge positions.

The world's No.1 gold producer, Barrick Gold Corp., said its second-quarter profit fell 14 percent as the company took a $66 million charge to unwind its last remaining gold hedges on current production.

Gold hedging by mining companies fell by 5.4 million ounces to 31.2 million in the second quarter of 2007 and for the full year, hedging is expected to drop between 11-13 million ounces, a report said. In South Africa, trade unions declared a dispute against the country's major gold companies after the workers rejected a higher wage offer, a spokesman for one of the labour groups said on Wednesday.

Platinum rose $4 to $1,287/1,292 an ounce, while silver was at $12.97/13.01 an ounce, versus $12.89/12.94 in New York.

Palladium was unchanged at $362/366.

REUTERS SRS KP2003