* Widening EZ yield spreads indicates ongoing debt concerns
* Euro ticks lower, European stocks surrender early gains
* SPDR ETF at record; PIMCO cuts gold exposure on valuation
(Updates, adds comment, changes dateline from SINGAPORE)
By Jan Harvey
LONDON, June 16 (Reuters) - Gold rose above $1,235 an ounce
in Europe on Wednesday as widening spreads between Spanish and
German government bond yields pointed to ongoing concern over
European debt levels, supporting the metal's haven appeal.
Spot gold <XAU=> was bid at $1,235.75 an ounce at 0926 GMT,
against $1,232.45 late in New York on Tuesday. U.S. gold futures
for August delivery <GCQ0> rose $3.20 an ounce to $1,237.60.
"The whole sovereign debt situation lingers on," said Ole
Hansen, senior manager at Saxo Bank in Copenhagen. "There will
be persistent fear that some government debt in Europe will have
to be readjusted, and that will lend support (to gold)."
He added, furthermore, "It is relatively easy to drive gold
higher as we are getting into the summer period, when anything
can happen because it is characterised by high volatility and
low activity."
The premium demanded by investors to hold 10-year Spanish
government bonds over German Bunds rose to a euro lifetime high
on Wednesday as investors grew nervous about Spain's credit
markets. []
The widening spreads pulled the euro back from the two-week
high it hit against the dollar earlier. []
A weaker euro, and consequently stronger dollar, has
historically been bad for gold, but the precious metal has
recently started to move more in line with the U.S. currency as
both benefit from risk aversion.
European shares meanwhile pared early gains to turn flat,
breaking a five-day winning streak. The wider markets are
awaiting a spate of U.S. data due later, including the May
producer price index reading at 1230 GMT. []
SPDR ETF HOLDINGS AT RECORD
Interest in physical gold kept holdings of the world's
largest gold-backed exchange-traded fund, New York's SPDR Gold
Trust <GLD>, at a record 1,306.137 tonnes on Tuesday.
There are concerns that gold may be overvalued at current
levels after reaching a record $1,251.20 last week.
The chief executive of PIMCO, the world's biggest bond fund,
said on Wednesday it had cut exposure to gold on valuation. "At
some point valuations became expensive and we halved our
exposure to gold," Mohamed El-Erian told Reuters TV.
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High prices are weighing on demand for gold in some
traditionally key bullion markets, such as India and the Middle
East, and encouraging more selling of scrap gold.
Istanbul Gold Exchange Chairman Osman Sarac told Reuters on
Wednesday that Turkey's 2010 gold imports will not exceed 2
tonnes, versus an earlier forecast of 40 tonnes. []
Turkey's gold imports to end May totalled 1.17 tonnes.
Among other precious metals, silver <XAG=> rose to $18.56 an
ounce against $18.49, outperforming gains in gold.
The gold-silver ratio -- how many ounces of silver are
needed to buy an ounce of gold -- fell to its lowest this month
on Wednesday, meaning the grey metal is becoming increasingly
expensive compared to gold.
Elsewhere platinum <XPT=> was at $1,575.50 an ounce against
$1,572.50, while palladium <XPD=> at $468.90 against $469.50.
Both metals have benefited this year from expectations
demand will continue to improve, both from carmakers -- the main
consumers of the white metals -- and investors, who have moved
into new platinum group metals-backed exchange-traded funds.
"Demand from auto catalyst producers is set to rebound this
year," said Bank of America-Merrill Lynch in a weekly report.
"The platinum market is too small to sustain several ETFs, and
inflows into these vehicles are set to support prices."
(Reporting by Jan Harvey; Editing by Jane Baird)
