Gold rose to a six-week high on speculation that a terrorist attack in India that killed 183 people yesterday may spur demand from investors seeking precious metals as a haven asset.

India is the biggest buyer of gold, accounting for 23 percent of consumer demand last year, the producer-funded World Gold Council estimates. The bombings in Mumbai, the country's commercial hub, injured 714 and is the deadliest attack in the country in 13 years.

``All the Indians came into the market,'' said Leonard Kaplan, president of Prospector Asset Management in Evanston, Illinois. ``It is panic buying. The geopolitical tensions just seem to be escalating. If that continues, gold goes higher.''

Gold futures for August delivery rose $8.10, or 1.3 percent, to $651.20 an ounce on the Comex division of the New York Mercantile Exchange, after reaching $657, the highest since May 31. Prices, which rose 2.7 percent yesterday, have rallied 19 percent since reaching a two-month low of $546.40 on June 14.

India's economic growth has helped fuel demand for gold, analysts said. Indian Finance Minister Palaniappan Chidambaram said the attacks in Mumbai won't hurt the economy, and he maintained his forecast for 8 percent growth this year.

While higher gold prices in the first quarter helped dampen demand from jewelers by 38 percent, investment demand rose 32 percent compared with a year earlier, the World Gold Council said. India purchased 587 tons to be made into jewelry last year, the most of any country.

Middle East Tension

Rising political tensions in the Middle East also helped sustain the gain in precious metals. The Lebanese militant group Hezbollah seized two Israeli soldiers this morning, 15 days after Israel's incursion into the Gaza Strip. Israel responded by firing aircraft missiles at 17 targets in south Lebanon.

``Political worries have no doubt been emphasized in investors' minds by Israel's incursion into Lebanon this morning,'' JPMorgan Chase & Co. metals analyst John Bridges wrote in a report. ``Yesterday's terrorist attacks in India are probably reminding investors that anti-western groups are active across the world.''

Gold, already up 52 percent in the past year, may rise on demand for the metal as an alternative currency to the U.S. dollar and the euro, some analysts said. Gold priced in U.S. dollar gained 18 percent last year while gold priced in euros and yen rose 36 percent.

Reserve Asset

Some of the world's smaller central banks have shown a ``steady tendency to own gold'' as a reserve asset, said Dennis Gartman, a gold trader, economist and editor of the Gartman Letter in Suffolk, Virginia.

Central banks in South Africa, China and Russia have said they wanted to increase their holdings of gold.

Today's rally in gold was limited by gains in the dollar, said Stephen Platt, a commodities analyst at Archer Financial Services Inc. in Chicago.

Gold generally moves in the opposite direction of the dollar, which gained today after a government report showed the U.S. trade deficit in May widened less than economists had forecast. A smaller trade gap means fewer dollars need to be sold to buy foreign goods.

``Given the strength of the dollar, gold probably won't improve upon the gains,'' Platt said. ``Investors could be a lot more cautious at these levels.''