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Wednesday, May 12, 2010

Gold strikes new record high on Europe debt woes

Wed, May 12, 2010 at 11:43 | Source : Reuters

Gold struck another record high above USD 1,230 an ounce on Wednesday on safe haven buying as investors bet the euro zone debt crisis could spread beyond Greece.

Jewellers cashed in on the rally and dealers noted a pick up sales of scrap in Asia, which could curb further gains. But any correction could be limited as a USD 1-trillion European rescue package had done little to ease fears of euro zone debt contagion.

"I think sentiment is slightly bullish from here. We don't really know where the top is," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong. "We may be talking about USD 1,250."

Spot gold hit a bid high of USD 1,234.70 an ounce before slipping to USD 1,233.10 by 0516 GMT, still up USD 1.05 from New York's notional close on Tuesday, when buying from investors helped it surpass December's record.

Gold priced in euro hit another record high on Wednesday.

Some dealers said gains in silver were partly responsible for gold's rally. The white metal jumped to a five-month high on Tuesday on buying by funds attracted by the metal's cheap prices compared to gold, platinum and palladium.

The world's largest silver-backed exchange-traded fund, the iShares Silver Trust, said its holdings rose to 9,115.15 tonnes as of May 11, up 27.43 tonnes from 9,087.72 tonnes in the previous business day.

"We've seen the worst and the market now needs a few days to consolidate. We'll probably wait again for leads from the stock markets today," said Darren Heathcote, head of trading at Investec Australia in Sydney.

The world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings were unchanged at record high of 1,192.150 tonnes as of May 11.

US gold futures for June delivery added USD13.7 an ounce to USD 1,233.6 an ounce.

Japan's Nikkei average edged up 0.5 % on Wednesday, defying declines in New York but there were lingering fears the bailout package for Europe won't solve the region's deep-seated problems.

The euro dropped on persistent worries about the euro zone's ability to to deliver the drastic spending cuts and tax increases needed to tackle its debt crisis, while sterling held gains after a new UK coalition government was formed.