* SPDR Gold ETF breaks 800-tonne level to set new record
* Gold hits new record high in sterling terms
* UBS, Morgan Stanley upgrade gold price forecasts
(Updates throughout, adds comment)
By Jan Harvey
LONDON, Jan 21 (Reuters) - Gold eased a touch on Wednesday
as traders took profits after early gains, but held above $850
an ounce as interest in the metal as a haven from risk supported
prices.
Spot gold <XAU=> was at $851.05/852.65 an ounce at 1457 GMT
against $855.20 late in New York on Tuesday.
U.S. gold futures for February delivery <GCG9> on the COMEX
division of the New York Mercantile Exchange eased $5.90 to
$849.30 an ounce.
The precious metal earlier hit a new record high in sterling
terms of 626.43 pounds, according to Reuters data, as the
currency languished.
Investors are buying physical bullion as a haven from risk,
according to analysts.
"Investors are switching to gold, but not in any form," said
Barclays Capital analyst Suki Cooper. "Where we are really
seeing an increase is in small bars and coins, and in the
physically backed exchange-traded funds."
A combination of underperformance in other assets, fears
over economic growth and the falling interest rate environment
are all boosting the appeal of gold, she added.
On the currency markets, the euro firmed a touch against the
dollar, but analysts said gains were likely to be short-lived
amid a spate of bad news from the euro zone economies.
Weakness in the dollar versus the euro typically supports
gold, which is often bought as an alternative investment to the
U.S. currency. []
Gold looks likely to remain underpinned by buying from
risk-averse investors as the economic outlook stays murky.
Major banks Morgan Stanley and UBS on Wednesday upgraded
their full-year gold price forecasts, citing safe-haven buying.
[]
U.S. bank Morgan Stanley <MS.N> raised its 2009 gold price
forecast to $900 an ounce from $750 previously, and its 2010
price view to $1,000 from $825.
UBS <UBSN.VX> said it now sees gold at $900 an ounce in one
month, against a previous forecast for $800, and at $850 an
ounce in three months, also against $800.
"Our client flows suggest that the developments in the
banking sector have truly spooked investors again, with strong
demand for coins and small investment bars seen since the start
of the week," said UBS strategist John Reade in a note.
"The key to where gold heads from here is in the concerns
about the banking sector," he added.
SPDR BREAKS 800-TONNE LEVEL
Investment in bullion exchange-traded funds, which issue
securities backed by physical stocks of the metal and are seen
as a relatively low-risk investment, was one of the key drivers
of recent price gains.
The world's largest gold-backed ETF, New York's SPDR Gold
Trust <GLD>, said its holdings rose 1 percent on Tuesday to
breach the 800-tonne barrier for the first time ever.
[]
In December SPDR took over from the Bank of Japan as the
world's seventh largest holder of gold. With the economic
outlook gloomy and worries about longer term inflation rife,
investors' confidence in bullion is firm.
"The next few months gold is likely to be very volatile,"
said Fairfax investment bank analyst John Meyer.
"However, longer term, the stimulus plans by the United
States and printing of money are likely to lead to devaluation
of the dollar which will lift gold prices."
Among other precious metals, silver <XAG=> climbed to
$11.34/11.40 an ounce from $11.11 late in New York on Tuesday.
Platinum <XPT=> eased a touch to $926.50/931.50 an ounce
from $937.50, while palladium <XPD=> was little changed at
$181.50/186.50 an ounce against $182.
Both metals have steadied after posting dramatic losses on
the back of falling demand from the automotive industry, which
typically accounts for some 50 percent of platinum and palladium
demand.
(Reporting by Jan Harvey; Editing by Peter Blackburn)
