* Euro surrenders gains, Wall St stocks down
* SPDR ETF at record; PIMCO cuts gold exposure on valuation
(Updates throughout with comment, prices)
By Amanda Cooper
LONDON, June 16 (Reuters) - Gold held steady on Wednesday as
some investors took the metal's earlier rise above $1,235 an
ounce to take profit, while concern about the unfolding debt
crisis in Europe and the global economic outlook provided
support.
A drop in U.S. homebuilding to a five-month low, a stark
warning from FedEx <FDX.N> -- often viewed as a gauge of the
health of the wider economy -- and heightened concern over the
fiscal problems in euro zone member Spain reinforced the
backdrop for gold.
Spot gold <XAU=> was bid at $1,232.65 an ounce at 1415 GMT,
against $1,232.45 late in New York on Tuesday. U.S. gold futures
for August delivery <GCQ0> were down 50 cents at $1,233.90.
"The main focus really is on one hand the liquidity, so
what's tending to happen is people are tending to buy gold and
other assets at the same time," said Standard Chartered analyst
Daniel Smith.
"We are going to push higher in the weeks ahead. The
pullback we saw from the previous highs is quite limited and
investors are still waiting to come into this market."
Gold hit a record high of $1,251.20 last week and is now
just over 1 percent away from this level, as the euro zone debt
crisis has raised the risk of a slowdown in global economic
growth and triggered a broad investor push into perceived
safe-haven assets such as bullion or government bonds.
"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: "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."
Fresh concern about Spain's banking and credit system
knocked the euro off two-week highs against the dollar, and
forced the premium investors' demand for holding Spanish debt
over German bunds to a euro life high. [][]
A weaker euro, and consequently stronger dollar, has
historically been bad for gold, but this correlation has broken
down as investors have sought safety in the U.S. currency.
U.S. stocks fell at the start of trade after a decline in
U.S. housing starts to a five-month low and as concern over
Spain's fiscal situation rattled investors.
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.
Some large investors have expressed concern 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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For Reuters Insider interview, click on:
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Last week, commodities investor Robert Prechter said gold
could fall by as much as 40 percent from its recent highs.
[]
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. []
Silver <XAG=> edged up to $18.51 an ounce against $18.49.
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 metal is becoming increasingly
expensive compared with gold.
Platinum <XPT=> was at $1,568.50 an ounce against $1,572.50,
while palladium <XPD=> was at $469.00 against $469.50.
(Editing by Sue Thomas)
