* SPDR Gold ETF breaks 800-tonne level to set record
* Gold hits new record high in sterling terms
* UBS, Morgan Stanley upgrade gold price forecasts
(Recasts, updates with quotes, closing prices, adds NEW YORK
to dateline)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Jan 21 (Reuters) - Gold ended slightly
lower on Wednesday as traders took profits after early gains,
but prices held above $850 an ounce as interest in the metal as
a haven from risk supported prices.
Traders also cited chart-based selling as prices failed to
decisively break above resistance near $860 an ounce.
However, John March, chief technical analyst of bullion
dealer Superior Gold Group, said that high premium of physical
gold products reflected strong underlying demand for gold.
"You are seeing this tremendous dichotomy between what is
going on in the actual physical gold market and what is going
on in the futures market," March said.
Spot gold <XAU=> was at $849.10 an ounce at 2:15 p.m. EST
(1915 GMT), down 0.7 percent from the last trade of $855.20 on
Tuesday.
Gold for February delivery <GCG9> settled down $5.10 at
$850.10 an ounce on the COMEX division of the New York
Mercantile Exchange.
Gold earlier hit a record high in sterling terms of 626.43
pounds, according to Reuters data, as the currency languished.
<XAUGBP=R>
"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.
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 TRUST 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.
[]
In December, the trust 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.
Among other precious metals, silver <XAG=> quoted at $11.21
an ounce, up 0.9 percent from its previous session close of
$11.11.
Platinum <XPT=> quoted at $920.00 an ounce, down 1.9
percent from its last finish of $937.50, while palladium <XPD=>
was at $182, essentially unchanged compared with its previous
close on Tuesday.
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.
(Editing by Christian Wiessner)
