* Moody's downgrade of Greece lifts risk aversion
* SPDR gold ETF holdings stay at record above 1,306 T
* Gold-silver ratio drops to two-week low
(Updates prices, comment, rewrites throughout. Changes
byline, dateline)
By Carole Vaporean and Jan Harvey
NEW YORK/LONDON, June 15 (Reuters) - Gold rallied on
Tuesday after a ratings downgrade of Greece reignited fears of
a worsening fiscal crisis and lifted interest in the metal as a
shield against instability in the wider markets.
Spot gold <XAU=> moved up to $1,233.55 an ounce by 3:30 EDT
(1930 GMT), against $1,220.15 late in New York on Monday. U.S.
gold futures for August delivery <GCQ0> finished $9.90 higher
at $1,234.40 an ounce, after earlier touching its a one-week
peak at $1,237.
Analysts said the Moody's downgrade of Greek government
debt ratings to junk was not unexpected, but it reminded
investors Europe's debt crisis was not over. Medium-term
concerns over fiscal stability are likely to fuel further gains
in the metal, they added.
"We have got a lot of potential market disruption risk this
year -- sovereign risk from Europe, fiscal tightening, at some
point monetary tightening, and regulatory risk as well," said
Michael Lewis, head of commodity research at Deutsche Bank.
"There are a number of external events that could be quite
positive for gold." But he added he expected the pace of gains
to slow from the rate seen from the end of April.
In New York, Rick Bensignor, chief market strategist at
Execution Noble Llc said Tuesday's move up was likely currency
related along with renewed gains in U.S. stock markets.
"I have not re-initiated a new long, but seeing that gold's
not breaking down makes me feel it's hanging in there nicely.
If it can do that when the dollar's come off, it makes me think
that it has better chances of moving higher," said Bensignor.
Noting gold has also spent a fair amount of time this year
following the S&P, he said, "with the market having moved up in
the last several days gold managed to hold in there and gets an
up move also."
European and U.S. shares moved higher, boosted by strong
demand for Irish and Spanish government debt and U.S. data
showing inflation remained under control. []
U.S. stocks extended gains as semiconductor shares rose and
energy stocks were lifted by bets the sector has seen the worst
of the selling. []
The euro <EUR=> rose hitting a two-week high against the
U.S. dollar after solid demand at European debt auctions
soothed some worries about euro zone debt problems. []
A stronger euro, and consequently weaker dollar, typically
benefits gold, although the relationship has weakened this year
as sovereign risk issues in the euro zone knocked the single
currency while lifting bullion's appeal as a haven.
Physical demand for gold firmed a touch in Asia as prices
slipped from record highs. Sales of scrap in the world's number
one consumer, India, subsided although domestic prices were
within sight of record levels. []
FIRM DEMAND
Firm demand for physical bullion from investors also kept
holdings of the world's largest gold-backed exchange-traded
fund, New York's SPDR Gold Trust <GLD>, at record highs above
1,306 tonnes on Monday.
From a technical perspective, the outlook for the precious
metal is positive, said chartists.
"The metal spent the last three days consolidating between
$1,215 and $1,238, and probability now lies with the bullish
trend for another attempt on its record high," said
ScotiaMocatta in a note.
Bensignor pointed out COMEX August gold has been held its
20-day moving average for 3 days in a row, trading down to the
average and then holding it.
"That's not definitively a breakout, but it is bullish. A
daily close above $1,250.50 is definitely bullish," he said.
Silver <XAG=> jumped to $18.55 an ounce against $18.16.
The ratio of gold to silver -- how many ounces of silver
are needed to buy an ounce of gold -- fell to a two-week low on
Tuesday near 66:1, showing the metal is becoming increasingly
expensive compared with gold.
Platinum <XPT=> moved up to $1,569.50 an ounce against
$1,557, and palladium <XPD=> surged to $470.0 from $456.0.
The platinum group metals, which are primarily used in
catalytic converters, are particularly sensitive to
developments in the automotive sector, which Morgan Stanley
upgraded to "attractive" from "in-line". []
(Reporting by Carole Vaporean;Editing by Sofina Mirza-Reid )
