U.S. stocks rallied about 1 percent on Thursday as data signaled positive trends for the economy, but gold prices fell for a fourth consecutive session as investors constrained by tight liquidity resulting from the euro-zone debt crisis were forced to sell.

The euro initially slid to a 15-month low against the U.S. dollar after a key Italian debt auction failed to ease concerns about the crisis. It erased losses later - trading a tad higher at $1.2951 - as market sentiment improved and the S&P 500 made it back into positive territory for the year.

World stocks also rose. The MSCI All-Country World index <.MIWD00000PUS> gained 0.83 percent, although it remained down nearly 10 percent for 2011.

We have seen a pretty encouraging trend in the U.S. economic data over the last two months, said Peter Jankovskis, co-chief investment officer of OakBrook Investments in Lisle, Illinois. If that trend continues, that will provide good support and perhaps some upward momentum.

Among Thursday's encouraging economic data, pending sales of existing U.S. homes surged to a 1-1/2-year high in November and factory activity in the U.S. Midwest grew more than expected in December.

In addition, even as initial claims for unemployment benefits rose last week, the U.S. labor market showed signs of recovery, with the more stable four-week moving average for jobless claims falling to its lowest level since June 2008.

The Dow Jones industrial average <.DJI> closed higher 135.63 points, or 1.12 percent, at 12,287.04. The Standard & Poor's 500 Index <.SPX> rose 13.38 points, or 1.07 percent, to 1,263.02. The Nasdaq Composite Index <.IXIC> gained 23.76 points, or 0.92 percent, to 2,613.74.

The rally left the S&P 500 with gains of 0.4 percent for the year, with one more trading day left in 2011.

In Europe, the FTSEurofirst 300 <.FTEU3> index of top shares extended gains after the release of the U.S. data. The index climbed 0.96 percent to close at 992.78 points.

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Global markets' performance: http://r.reuters.com/xut75s

US pending home sales: http://link.reuters.com/bet75s

US labor market: http://r.reuters.com/qed63s

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EUROPE FEARS REMAIN

Gold prices fell as many investors, facing tight capital market conditions due to the euro-zone crisis, had to raise money to meet their financial obligations.

At one point, gold was down more than 20 percent from a September high, briefly entering bear market territory. It later pared losses to trade down 0.38 percent at $1,546.20.

Concerns about Italy continued to weigh on global markets after the country's latest debt auction, with banks unwilling to lend despite massive capital injections by the European Central Bank.

On Thursday, Italy sold about 7 billion euros in bonds, below its target of 8.5 billion euros. Yields on the 10-year paper fell from a recent high, but remained just under 7 percent - a level seen as unsustainable in the long run.

There's a real worry now that the first quarter could be crunch time in the euro crisis just because of the sheer volume of debt that needs to be rolled over by euro-zone countries, said Standard Chartered strategist David Mann.

Italy has a debt burden of around 120 percent of GDP, and about 150 billion euros in debt coming due between February and April.

Reflecting lingering concerns about the euro zone, U.S. government debt prices rose in thin trade. Benchmark 10-year Treasuries rose 7/32 in price, sending its yield down to 1.8971 percent.

U.S. crude oil settled at $99.92 per barrel, 0.29 percent higher on the day, in a very choppy session.

(Additional reporting by Steven C. Johnson, Angela Moon and Frank Tang; Editing by Kenneth Barry, Andrew Hay, Chizu Nomiyama, Leslie Adler)