PRECIOUS-Gold gains as stock rout, Middle East tensions trigger demand

* Gold jumped as much as 2.2 pct on Monday
* China stock indexes close mixed, European shares up
* Saudi Arabia to stop flights, trade with Iran

(Updates throughout, changes dateline from SINGAPORE)
By Clara Denina
LONDON, Jan 5 (Reuters) - Gold rose on Tuesday as a wave of
risk aversion due to growth worries in China and rising tensions
in the Middle East triggered demand for the metal.
Spot gold XAU= was up 0.3 percent at $1,077.60 an ounce by
1058 GMT. On Monday, the metal jumped as much as 2.2 percent to
a four-week high of $1,083.30 after data showed Chinese factory
activity contracted for a 10th straight month in December.
"More weakness in China ... would be more positive for gold
but investors would need to see more evidence of systemic issues
there, which is still unlikely," Julius Baer analyst Carsten
Menke said.
"That could be the only longer lasting upside for gold in an
otherwise bearish outlook due to sound growth in the U.S. and
lack of inflation risks."
A 7 percent slide in Chinese shares on Monday sparked by
weak economic data rekindled worries over global growth on the
first day of trading in 2016, and sent European and U.S. stocks
diving. MKTS/GLOB
China stocks closed mixed on Tuesday in volatile trade, with
indexes swinging into and out of negative territory, while
European indices rebounded. .EU
"The first important resistance zone (for gold) lies between
$1,083 and $1,087, with the next major level at $1,100," said
MKS Group in a note.
Bullion, often seen as a alternative investment in times of
political and financial uncertainty, is also benefiting from a
shift away from risk along with the Japanese yen and U.S. bonds.
Saudi Arabia's execution of a Shi'ite Muslim cleric over the
weekend provoked protests among Shi'ites across the region.
Saudi Arabia also said it would end air traffic and
trade links with Tehran.
Safe-haven rallies tend to be short-lived and gold could see
the focus shift back to U.S. monetary policy soon.
Gold slid 10 percent last year on fears that higher U.S.
rates would lower demand for the non-interest-paying asset,
while boosting the dollar. A stronger greenback makes
dollar-denominated gold costlier for holders of other
currencies.
San Francisco Federal Reserve President John Williams said
Monday he is unfazed by the weak economic data out of China that
has spooked Wall Street, and sees three to five U.S. interest
rate hikes this year as reasonable given the strength of the
U.S. economy.
Investor sentiment remains bearish. Hedge funds and money
managers boosted their net short position in COMEX gold to a
fresh record in the week to Dec. 29, U.S. government data showed
on Monday.
Silver XAG= rose 0.6 percent to $13.95 an ounce, having
ended 2015 down 11.7 percent.
Industrial metal platinum XPT= was up 0.4 percent to
$887.10 an ounce and palladium XPD= gained 0.5 percent to
$541.72.