* Gold edges back from all-time high as rally peters out
* Europe debt crisis, U.S. money supply in focus
* Silver touches highest since 1980 above $30/oz
(Updates prices)
By Amanda Cooper and Jan Harvey
LONDON, Dec 7 (Reuters) - Gold hit record highs for a second
successive day on Tuesday, driven by fund buying ahead of the
end of the year, the prospect of more U.S. monetary easing and
investor nervousness over the European debt crisis.
The metal later retreated back below $1,420 an ounce as its
run higher lost traction, but remains well supported as the
investment community push into commodities ahead of the
year-end, analysts said.
Spot gold <XAU=> hit a record high at $1,430.95 an ounce
before easing back to $1,419.45 at 1458 GMT, against $1,422.85
late on Monday. Gold priced in euros <XAUEUR=R> also hit a
record high at 1,072.03 euros an ounce.
U.S. gold futures for February delivery <GCG1> were up $5.40
an ounce at $1,421.50.
Germany and other euro zone states have resisted calls from
the International Monetary Fund to do more to quell the bloc's
debt crisis, although the euro firmed on optimism that Ireland
would pass an austerity budget. [] []
"Even though the euro is regaining a little bit of strength
against the dollar after the losses yesterday, it is still on
the weak side, and fears of contagion are lingering," said Peter
Fertig, a consultant at Quantitative Commodity Research.
"The decision from the Berlin government not to increase the
volume of the European financial stability fund and also not to
introduce so-called E-bonds for the whole euro zone is still a
factor which is supporting gold as a safe haven."
"The interview Bernanke gave over the weekend that QE3 would
be possible is another factor supporting gold," he added.
Federal Reserve Chairman Ben Bernanke signalled on Sunday
the central bank could expand its existing quantitative easing
programme by buying more government bonds. []
TWO STEPS FORWARD, ONE BACK
With the U.S. dollar set to come under more pressure from
the prospect of rising money supply, gold should reap the
benefits of investors seeking an alternative to volatile
currencies, analysts said.
However, the end of the year traditionally brings with it
less liquidity and greater potential for rapid shifts in price
direction, meaning that gold could see more setbacks before
resuming its uptrend.
"Tactical investors have turned positive on gold and silver
and increased their long exposure. In our view, positioning does
not look excessive, suggesting that the sector could attract
further near-term flows," said Credit Suisse analysts in a note.
"However, with markets closing in on critical price levels,
risks of investors' taking profits have increased as well."
In investment news for gold, China's Lion Fund Management
Co., which is launching the country's first gold fund worth up
to $500 million, is examining a dozen gold-backed
exchange-traded funds on the global market as potential targets.
[]
Holdings of gold in the SPDR Gold Trust <GLD>, the world's
largest gold-backed ETF, were unchanged on Tuesday, having risen
by over 11 tonnes so far this month, compared with a one tonne
increase over the same period last month. [].
Silver <XAG=> rallied to fresh 30-year highs at $30.68 an
ounce and were later trading at $30.27, up from $30.14.
The world's largest silver-backed exchange-traded fund,
iShares Silver Trust, said its holdings rose to 10,816.69 tonnes
by Dec. 6 from 10,778.68 on Dec. 2. The holdings jumped to an
all-time high of 10,893.68 tonnes on Nov. 23. []
The number of ounces of silver needed to buy one ounce of
gold hit its lowest level since February 2007 at just 46.99,
having declined from a seven-month high this February at 70.91.
Platinum <XPT=> inched down to $1,717.24 an ounce, while
palladium <XPD=> was up 0.75 percent at $761.22.
(Editing by James Jukwey)
