* Gold rises even as dollar firms
* SPDR Gold Trust bullion holdings hit record
* Physical demand for gold coin, bars remains strong
(Recasts, updates quotes, prices, adds NEW YORK to dateline)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Jan 22 (Reuters) - Gold prices turned 1
percent higher Thursday as jittery investors soaked up physical
bullion and pushed prices higher despite a stronger dollar.
"Gold's strength seems to be based on worries over the
banking sector, which has set the market onto an upward path,"
said Tom Pawlicki, a precious metals and energy analyst of MF
Global.
Pawlicki said investors turned to gold as a safe haven as
they were pricing in the worst of what could happen to the
banking sector after Royal Bank of Scotland reported huge losses
and Bank of America was granted more government funding.
Spot gold <XAU=> was at $860.10 an ounce at 2:12 p.m. EST
(1912 GMT), up 0.7 percent from the last trade of $854.05 on
Wednesday.
Gold for February delivery <GCG9> settled up $8.70, or 1
percent, at $858.80 an ounce on the COMEX division of the New
York Mercantile Exchange.
Analysts said a retracement was possible with the gold
market overbought and the dollar getting stronger. However,
demand is strong for small investment products such as coins and
bars, traders said.
"As in October and November, since the beginning of the week
we have seen strong investor demand for physical gold," said MKS
finance head of trading Afshin Nabavi. "There has been demand
for physical kilobars and coins."
Patricia Mohr, vice president, economics & commodity market
specialist at the Scotiabank Group, said that exceptional retail
interest could be seen in gold coins and bars recently, and
investment inflows into gold and silver exchange-traded funds
was expected to stay strong.
ETF DEMAND SUPPORTS
Interest in physically backed products -- such as
exchange-traded funds, which issue securities backed by physical
stocks of gold -- has also soared.
The world's largest bullion-backed ETF, New York's SPDR Gold
Trust, commonly known as GLD, said its holdings rose to a record
805.96 tonnes on Wednesday. []
"GLD holdings are rising because retail investors are
finally thinking: My stock market investments are absolutely
rubbish, and I don't trust my bank account. So what are the
other alternatives? The first thing they came across is GLD,"
said Tom Dyson, editor of DailyWealth.com
In Europe, Zurich Cantonal Bank said holdings of its
gold-backed ETF <ZGLD.S> have risen by 9 percent, or 283,000
ounces, since the end of November. []
Gold has recently tracked its main external drivers, oil and
the dollar, but less this week as safe-haven buying sparked by
fears over the global economy has taken center stage.
Gold "defied the dollar this week" and "divorced from oil as
the financial crisis sees further bank shares collapse," Fairfax
analyst John Meyer said in a daily note.
Among other precious metals, silver <XAG=> was quoted at
$11.40 an ounce, up 0.8 percent from its previous session close
of $11.31 an ounce.
Platinum remained broadly rangebound, building a base below
$1,000, after sharp falls in the later part of 2008.
Prices plummeted from a high of $2,290 an ounce in March as
investors worried about the outlook for demand from carmakers,
which account for around half of global platinum consumption.
Platinum <XPT=> was at $924.00 an ounce, up 0.1 percent from
its last finish of $923.50 on Wednesday, while palladium <XPD=>
was at $182.00 an ounce, down 0.8 percent from its previous
close of $183.50.
(Reporting by Frank Tang; editing by Jim Marshall)
