* Moody's cut Portugal debt reviving euro zone worries
* SPDR gold ETF holdings edge up after week of decline
* GFMS says BIS swaps show gold's value as financial asset
(Updates prices, comment, changes byline and dateline)
By Carole Vaporean and Jan Harvey
NEW YORK/LONDON, July 13 (Reuters) - Gold rose nearly 2
percent to a high of $1,217.60 an ounce on Tuesday after debt
rating agency Moody's cut Portugal's debt, boosting the yellow
metal's appeal as a haven from risk and a hedge against
currency market volatility.
Spot gold <XAU=> was bid at $1,211.95 an ounce by 2:42 p.m.
(1842 GMT) against $1,194.85 late in New York on Monday.
U.S. gold futures for August delivery <GCQ0> settled $14.80
higher at $1,213.50 an ounce, a 1.23 percent rise, on the
COMEX. It reached $1,218.80, its highest since July 1.
Investors revived their interest in gold as a tangible
asset amid renewed sovereign debt concerns in Europe, along
with rallies in the euro and in oil prices, analysts said.
"The downgrade reminded people that Europe is not really in
a good way," said Commerzbank senior trader Michael Kempinski.
"Gold needs to break $1,225/1,230, then it will be more
interesting. So far (it is) still stuck in a range here."
Gains in the euro helped push gold to its highs. The single
currency rallied to a two-month high when a strong start to
U.S. corporate earnings season drove risk appetite, and the
U.S. trade deficit widened unexpectedly in May, weighing down
the dollar [].
Earlier, the Moody's downgrade of Portugal's debt revived
concerns over euro zone sovereign debt levels, an issue which
drove gold to a record $1,264.90 an ounce in June.
"What we see from our clients is that there is a lot of
interest in protecting portfolios. Exposure to gold at least
dampens down some of the worst effects of currency volatility,"
said Daniel Smith, an analyst at Standard Chartered.
"There is a continued focus in Asia as well on worries
about inflation," he added. "It still very much remains a tale
of two worlds, which is that the West is still very worried
about currency values, and Asia is worried about potential
inflation. Both of those things are supportive for gold."
Graphic: http://r.reuters.com/kuv45m
GFMS SEES BIS SWAP AS POSITIVE
Gains in oil prices also encouraged purchases of gold. U.S.
crude oil futures ended nearly 3 percent higher, as investors
latched onto a rally in Wall Street stocks that was fueled by
optimism over second quarter earnings []
Elsewhere, GFMS chairman Philip Klapwijk told Reuters
Insider television the 346 tonnes of gold swap operations by
the Bank of International Settlements in recent months
highlight gold's central role in the world financial system.
[]
The operations are unlikely to lead to dumping of the metal
on the market, he said. The operations, detailed in the latest
BIS annual report, show the bank was holding 346 tonnes of gold
as part of swap operations in exchange for currencies.
"Here we have gold being used quite creatively," Klapwijk
said. "That is in a sense a validation again of gold's
centrality to the financial system."
Appetite for gold-backed exchange-traded funds recovered,
with holdings of the largest, New York's SPDR Gold Trust <GLD>,
edging up 0.304 tonnes on Monday after they declined more than
4 tonnes last week. []
Among other precious metals, silver <XAG=> was at $18.22 an
ounce versus $17.86, platinum <XPT=> at $1,525.50 an ounce
against $1,512, and palladium <XPD=> at $460.60 against $452.
(Reporting by Jan Harvey;Editing by Sofina Mirza-Reid)
