PRECIOUS-Gold rises on economic worries, set for Q3 gain

* Gold lower as dollar benefits from falling stocks

* Bullion set for quarterly gain but worst month Oct 2008

* Silver set for monthly and quarterly decline (Recasts, updates comment, prices, adds NEW YORK to dateline, second byline)

By Frank Tang and Jan Harvey

NEW YORK/LONDON, Sept 30 (Reuters) - Gold rose on Friday on lingering worries of a global economic slowdown as the price of bullion is set to notch its biggest quarterly gain of this year despite a sharp pullback from its record this month.

Bullion reasserted its safe-haven status even as the dollar rose and equities and industrial commodities broadly fell, after data showed China's manufacturing sector contracted for a third consecutive month in September.

The metal, however, is 15 percent below its record of $1,920 an ounce set early this month, having largely fallen in tandem with riskier assets. Gold is on track for a 11 percent drop in September, its largely monthly decline in three years.

"I think the correction has run its course. For the first time in quite some time, we actually bought some gold and platinum exchange-traded funds today," said James Dailey, portfolio manager of the TEAM Financial Asset Management.

Spot gold was up 0.5 percent at $1,621.59 an ounce by 11:49 a.m. EDT (1549 GMT).

U.S. gold futures for December delivery GCZ1 were up $6.90 at $1,624.20 an ounce, with trading volume sharply below this week's average.

The metal is poised to rise 8 percent for the quarter, its biggest quarterly gain this year, as fears that the euro zone debt crisis is far from resolved underpinned safe-haven bids.

Extreme volatility this month saw the metal in a near $400 range after hitting a record $1,920.30 an ounce on Sept. 6.

Though the correction from that high has lifted physical demand, buyers remain wary of gold after this month's violent fluctuations.

Afshin Nabavi, head of trading at MKS Finance, said the market was struggling within the $1,600 to 1,650 range.

Silver was down 0.8 percent at $30.33 an ounce. Holdings of the largest silver ETF, the iShares Silver Trust , fell nearly 23 tonnes on Thursday.

Silver prices have also seen extreme volatility this month, in line with gold, and are set to end the month 27 percent lower, and the quarter down 13 percent.

Spot platinum was up 0.1 percent at $1,519.24 an ounce, while spot palladium was down 0.9 percent at $610.22 an ounce. Prices at 11:49 a.m. EDT (1549 GMT)

LAST NET PCT YTD

CHG CHG CHG US gold GCZ1 1624.20 6.90 0.4% 14.3% US silver SIZ1 30.365 -0.157 -0.5% -1.8% US platinum PLV1 1512.70 -15.60 -1.0% -14.9% US palladium PAZ1 612.90 -10.70 -1.7% -23.7% Gold 1621.59 7.54 0.5% 14.2% Silver 30.33 -0.25 -0.8% -1.7% Platinum 1519.24 1.99 0.1% -14.0% Palladium 610.22 -5.78 -0.9% -23.7% Gold Fix 1620.00 -9.00 -0.6% 14.9% Silver Fix 30.45 26.00 0.9% -0.6% Platinum Fix 1511.00 27.00 1.8% -12.7% Palladium Fix 614.00 13.00 2.1% -22.4% (Editing by Bob Burgdorfer)

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