* Euro sinks to one-year low vs the dollar on Greece worries
* Cost of insuring against Greek debt default near record
* Gold-dollar link seen weakening throughout 2010
(Updates, adds comment, previous SINGAPORE)
By Jan Harvey
LONDON, April 23 (Reuters) - Gold held near $1,140 an ounce
on Friday, caught between contrasting pressures, as speculation
Greece could default on its sovereign debt supported both the
dollar and interest in the metal as a haven from financial risk.
Spot gold <XAU=> was bid at $1,140.25 an ounce at 0938 GMT,
against $1,140.45 late in New York on Thursday. U.S. gold
futures for June delivery <GCM0> on the COMEX division of the
New York Mercantile Exchange eased $1.70 to $1,141.30 an ounce.
The dollar hit one-year highs against the euro, keeping up
pressure on gold prices, as investors worried Greece will have
to seek a bailout to avoid default. While it later gave up those
gains, investors remain nervous towards the euro. []
Gold usually has a close inverse relationship to the dollar,
falling as the U.S. currency strengthens. However, that link has
weakened, with gold prices rising 4 percent since the start of
the year despite the dollar's 7 percent climb versus the euro.
Barclays Capital analyst Suki Cooper said gold is benefiting
from better appetite for the metal among short-term investors,
adding she expects gold's relationship to the euro-dollar to
weaken as the year progresses.
"Other concerns, like inflation and sovereign debt risk,
will come into play more, and we will see investors turning to
gold," she said.
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For a graphic showing gold's correlation to the euro/dollar
exchange rate, click on: http://link.reuters.com/ham96j
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Greek Prime Minister George Papandreou asked on Friday for
the activation of a euro zone and International Monetary Fund
aid package aimed at pulling the debt-laden country out of a
debt crisis. []
Concerns have grown this week over Greece's ability to
service its debts, pushing up the cost of insuring against a
debt default to a record high and widening spreads between Greek
and German government debt yields to previously unseen levels.
On Thursday Moody's Investors Service cut Greece's rating by
one notch, citing a risk of higher debt yields. []
UNCERTAINTY MOUNTS
"As the level of uncertainty around Greece and other weak
European states mounts, gold prices may be supported by 'safe
heaven' demand even in light of a stronger U.S. dollar," said
John Meyer, an analyst at Fairfax investment bank, in a note.
"The IMF has warned recently that growing sovereign debt
levels are the major threat to the global economy," he added.
"Gold investments may protect against currency devaluation in
times of rising government debts."
Gold priced in euros <XAUEUR=R> rose to a peak of 863.28
euros an ounce in Asian trade, close to the record high of
864.75 euros an ounce it reached earlier this month.
Meanwhile physical demand for the metal was soft in major
consumer India, dealers in Mumbai reported, as buyers awaited
lower prices. []
Holdings of the world's largest gold-backed exchange-traded
fund, New York's SPDR Gold Trust <GLD>, eased nearly 1 tonne on
Thursday, though they remain near record levels. []
Among other precious metals, silver <XAG=> was at $17.96 an
ounce against $17.95, platinum <XPT=> at $1,730 an ounce against
$1,740, and palladium <XPD=> at $556 against $561.
Autocatalyst materials platinum and palladium are succumbing
to profit taking, dealers said. Their gains have outstripped
those of other precious metals this year amid expectations car
demand will rise after last year's slump.
Platinum group metals-backed exchange-traded funds launched
in New York earlier this year are also absorbing the metals.
The ETFS Physical Platinum product held nearly 340,000
ounces of metal on Wednesday, while ETFS Physical Palladium had
holdings of nearly 670,000 ounces, equivalent to more than 10
percent of total palladium mine supply last year.
(Editing by James Jukwey)
