PRECIOUS-Gold rises as U.S. equities sink; outlook weak

Physical demand seen underpinning gold

* Dollar falls to three-week low vs euro after soft U.S. data

* S&P 500 plunges, U.S. Treasuries prices rally (Updates market activity)

By Frank Tang and Jan Harvey

NEW YORK/LONDON, Oct 15 (Reuters) - Gold rose on Wednesday, as global equities plunged and U.S. Treasuries prices surged following disappointing U.S. data, sparking economic fears and lifting bullion's safe-haven appeal.

The precious metal's failure to extend its rally despite heightened global market volatility, however, suggested gold prices could pull back in the near term, analysts said.

Wall Street dived after the U.S. government said retail sales slipped in September and producer prices fell, worrisome signals on the economy's health that heightened financial market worries over faltering global growth.

Each of the major stock indexes had fallen as much as 3 percent, while U.S. crude futuresdropped to just a cent above $80 a barrel. The S&P 500 stock index was last 1.9 percent lower, and U.S. crude also trimmed losses.

Bullion earlier rose to less than $1 below key resistance at $1,250 an ounce before sharply paring gains.

"Gold is vulnerable to more selloffs after it failed to hold earlier flight-to-safety gains," said Eli Tesfaye, senior market strategist at RJO Futures in Chicago. "With the IMF cutting its global growth forecast last week, inflation is not a key concern right now."

Spot gold was up 0.7 percent at $1,240.64 an ounce by 2:48 p.m. EDT (1848 GMT), having hit a one-month high of $1,249.30.

U.S. COMEX gold futures for December delivery settled up $10.50 an ounce at $1,244.80 in unusually heavy trading volume, preliminary Reuters data showed.

Gold has struggled for direction at a time of rising concerns over the health of the globaleconomy. Economic data from Europe has remained weak and a worse-than-expected inflation reading from China weighed on gold, an inflation hedge.

U.S. Treasuries jumped on Wednesday, with 30-year bond prices touching a near two-year high.

The dollar's slide to a three-week low against the euro on Wednesday helped gold. A recovery in the dollar had prevented gold from gaining traction after it rebounded last week from its lowest since mid-2013.

Gold took some support from physical markets. Gold imports in India, the world's second-biggest consumer of the metal, nearly doubled in September from August to $3.75 billion, ahead of the country's wedding and festival season.

Silver was down 0.1 percent at $17.41 an ounce.

Bank of America Merrill Lynch cut its silver price forecast for next year by 11.5 percent on Wednesday to $18.88 an ounce.

Platinum eased 0.3 percent to $1,255.99 an ounce. Palladium dropped 3.5 percent to $760 an ounce, as global growth worries sparked liquidation in the metal, which is mostly used in auto catalytic converters, analysts said. (Additional reporting by A. Ananthalakshmi in Singapore; Editing by William Hardy, Jane Baird and James Dalgleish)