* Gold prices rally to highest in five weeks
* Euro-priced bullion hits record as single currency slips
* Palladium at 2-yr highs, platinum at firmest in 20 months
(Updates prices, adds comment)
By Jan Harvey
LONDON, April 7 (Reuters) - Gold rose to a five-week high in
Europe on Wednesday and held near record levels in euro terms on
the back of strong physical demand and as investors, worried by
the outlook for the eurozone economy flocked into hard assets.
The metal shrugged off hefty gains in the dollar versus the
euro, which normally would weigh on gold, as dealers reported
good demand for physical stocks of the metal. Other precious
metals also rose, with palladium hitting a two-year high.
Spot gold <XAU=> peaked at $1,143.45 an ounce and was bid at
$1,142.15 an ounce at 1332 GMT, against $1,133.20 late in New
York on Tuesday.
"European GDP in Q4 was revised down to 0 percent today, and
the euro's direction looks to be downwards," said Matthew
Turner, an analyst at VM Group.
"We are used to American investors buying gold because they
think the dollar is going to fall. I guess we may have European
investors buying because they think the euro is going to go
down. That may be one reason why the euro-weak, gold-strong
relationship has happened."
The euro hit a fresh one-week low against the dollar on
Wednesday as concerns over Greece's fiscal problems escalated.
Greek banks have asked for permission to access the remaining
funds from a state support package first agreed in 2008. []
Concern over the outlook for the debt-laden Mediterranean
country and other smaller euro zone economies like Spain and
Ireland have weighed heavily on the single currency so far this
year, pushing it down 6.8 percent against the dollar.
A strong dollar would usually weigh on gold, but wider fears
over sovereign risk have supported it.
"Increasing concerns over fiscal deficit levels continue to
draw diversification towards hard assets, particularly gold,"
said James Moore, an analyst at TheBullionDesk.com.
Euro-priced gold <XAUEUR=R> hit a record high of 856.32
euros an ounce established earlier, and was later bid at 855.47
euros against 846.04 euros late on Tuesday.
Meanwhile U.S. gold futures for June delivery <GCM0> on the
COMEX division of the New York Mercantile Exchange rose $6.60
cents to $1,142.60 an ounce.
PLATINUM, PALLADIUM CLIMB
Gold prices are also being supported by expectations
interest rates will remain low for an extended period, which
will keep the opportunity cost of holding gold low.
Minutes from the U.S. Federal Reserve's last meeting
released on Tuesday suggested the bank could keep interest rates
ultra-low for even longer than investors expect if the economic
outlook worsens or inflation drops. []
Traders report Indian jewellers are stocking up for the
wedding season in the world's largest gold consumer. []
Among other commodities, platinum group metals also
benefited from expectations for an economic recovery, with
dealers reporting good demand for palladium in particular from
Japanese carmakers.
Platinum and palladium are primarily used in catalytic
convters, but both have also seen significant investment
interest this year.
Platinum <XPT=> hit its highest since August 2008 at $1,723
an ounce and was later at $1,711 an ounce against $1,697.50.
Palladium <XPD=> hit a two-year high at $511.50 and was later at
$508.50 against $504.50.
"Palladium, platinum and silver actually have been gaining
on gradually improving fundamentals alongside other industrial
metals," said VTB Capital analyst Andrey Kryuchenkov in a note.
Elsewhere silver <XAG=> was at $18.07 an ounce versus
$17.88.
(Reporting by Jan Harvey; Editing by Amanda Cooper)
