* Concern over European bank sector weighs on risk appetite
* Stocks ease, oil falls, but gold eyes record $1,264.90/oz
* Silver flirts with previous session's 2-1/2 yr high
(Updates throughout, changes dateline from SINGAPORE)
By Jan Harvey
LONDON, Sept 8 (Reuters) - Gold prices rose towards record
highs in Europe on Wednesday as concerns over the European
banking system weighed on appetite for assets seen as higher
risk, like stocks, and diverted investment into bullion.
Spot gold <XAU=> was bid at $1,258.35 an ounce at 0915 GMT
GMT, against $1,253.10 late in New York on Tuesday. U.S. gold
futures for December delivery <GCZ0> rose 90 cents to $1,260.20.
The metal has hit tough resistance at $1,260 an ounce, just
below its all-time high of $1,264.90, reached in June. But
analysts say they are confident in the metal's rise.
"It seems to be benefiting from equity weakness, the renewed
euro zone sovereign debt jitters and possibly concerns about new
U.S. spending measures," said Citigroup analyst David Thurtell.
He said while some funds would be selling ahead of technical
resistance at $1,260, "it's looking good".
European stocks fell at the open on Wednesday, tracking
losses in Asia, led by shares in Japan's big exporters as a rise
in the yen to a new 15-year high threatened to erode their
overseas earnings. []
The euro, little changed against the dollar, hit a lifetime
low against the Swiss franc as fears over the banking sector
prompted investors to seek refuge in the safe-haven Swiss
currency. []
Heightened risk aversion was also reflected on the bond
markets. Bund futures opened higher on worries about banks and
after Ireland extended its guarantee for short-term bank
liabilities. []
"With European debt concerns set to intensify, we expect
further investment diversification to propel the metals to fresh
highs," said TheBullionDesk.com analyst James Moore in a note.
OIL FALLS FOR THIRD DAY
Among other commodities, oil fell for a third session to
below $74 a barrel, pressured by rising U.S. petroleum
stockpiles and as a decline in equities reflected investors'
attempts to reduce risk exposure. []
On the supply side of the gold markets, China said its
production of the yellow metal fell 5.8 percent in July to
31.059 tonnes. China is the world's biggest gold miner.
[]
Gold prices are well placed technically after breaking out
of the relatively narrow $1,175-1,225 an ounce range they stuck
to for much of the summer, analysts said.
"The break of last week's high of $1,254 gets us that much
closer to target $1,265," said ScotiaMocatta in a note. "A
similar pattern was seen last week when we broke above the
previous weeks high of $1,244."
However, demand for physical gold from consumers like
jewellers was muted in higher prices. Wholesale gold buying in
India, the world's biggest bullion consumer, weakened on
Wednesday as prices rose. []
But dealers in Mumbai said overall demand was still being
supported by festival-related buying.
Elsewhere silver <XAG=> also rose 0.3 percent to $19.91 an
ounce from $19.83, having earlier approached the previous
session's high at $20, the metal's highest price in 2-1/2 years.
Platinum <XPT=> was at $1,555 an ounce against $1,553.03,
while palladium <XPD=> was at $523 against $520.85.
The metals have taken support in recent weeks from strikes
going on in major platinum group metals producer South Arica,
though the mining industry itself has been little affected.
"It is the climate of industrial action throughout the
country that we believe is important and may hold relevance for
platinum prices," said HSBC in a note. "South Africa produces
three-quarters of the world's platinum output."
"Unlike gold, platinum's supply/demand balances are tight,
with relatively little refined platinum held in above-ground
storage."
(Reporting by Jan Harvey; Editing by Alison Birrane)
