* ECB expects inflation at 0.7 percent this year
* ECB launches bond-buying program with new money (Adds milestone to paragraph 1, updates prices, adds comment)
By Marcy Nicholson and Clara Denina
NEW YORK/LONDON, Jan 22 (Reuters) - Gold turned higher and touched a five-month high above $1,300 per ounce on Thursday, after the European Central Bank (ECB) launched a multi-billion euro bond-buying program aimed at reviving a sagging euro zone economy.
President Mario Draghi said the ECB would print money to buy up 60 billion euros ($69 billion) worth of sovereign bonds a month in the euro zone, where inflation at minus 0.2 percent is far below the central bank's target of just under 2 percent.
He said inflation was expected to increase gradually later in 2015 and in 2016.
Gold is usually seen as a hedge against inflationary concerns.
"Gold is reacting to what Draghi has to say, to the bigger package that was announced and to rebounding inflation expectations in the euro zone," ABN Amro analyst Georgette Boele said.
Spot gold, which had fallen as much as 1 percent to a session low of $1,279.5 in early trade, turned positive after Draghi's announcement, to the highest since Aug. 15 at $1,306.20 an ounce. At 2:54 p.m. EST (1954 GMT) it was up 0.8 percent at $1,303.50.
U.S. gold futures for delivery in February closed above $1,300 for the first time since mid-August on a continuation chart, settling up 0.5 percent at $1,300.70 an ounce.
The metal has risen around 10 percent since the beginning of the month, its strongest month so far in two years, underpinned by higher demand for assets perceived as safer.
"We've also heard some announcements from other central banks that they've lowered rates, including the Bank of Canada, so the opportunity cost of holding gold now, in terms of fixed income assets or the yield they generate, has dropped," said Bart Melek, head of global commodity strategy for TD Securities in Toronto.
Gold gained strongly in euro terms, with euro-denominated gold reaching its highest since April 2013 at 1,145.86, after Draghi's comments knocked the euro to a more than 11-year low against the dollar.
The recent steep climb in gold prices has worried some investors, who started to take profits in the previous session and were looking at Sunday's snap election in Greece and next week's Federal Open Market Committee (FOMC) two-day policy meeting for clues about the wider macro economic environment.
The SPDR Gold Trust, the world's top gold-backed exchange-traded fund, saw outflows of 0.24 percent to 740.45 tonnes on Wednesday, after posting its biggest inflow since August 2012 earlier in the week.
Among other precious metals, spot silver was up 1.6 percent at $18.40 an ounce. Palladium was up 1.1 percent at $772 an ounce, while platinum rose 0.9 percent to $1,279.50 an ounce. (Additional reporting by A. Ananthalakshmi in Singapore, editing by Michael Urquhart)