* European equities turn negative, spurring flight to safety
* Gold hits record in euro terms, according to Reuters data
* Oil firms, dollar softens after Bank of Australia rate cut
* Metals firm on hope possible rate cuts may booost demand
By Jan Harvey
LONDON, Oct 7 (Reuters) - Gold rose more than 3 percent and
silver was up by 5 percent on Tuesday as European stock markets
turned lower, sparking a flight to safety.
Rising oil prices and a softer dollar underpinned gains as
commodities took on a firmer tone after recent losses.
Gold hit a record high in euro terms, according to Reuters
data, at 654.22 euros an ounce, up from 635.29 late on Monday.
Spot gold <XAU=> rose to a session high of $887.30 before
settling back to trade at $886.40/889.40 at 1017 GMT, up from
$857.45 an ounce in late New York trade on Monday.
Silver <XAG=> was at $11.65/11.75 an ounce, having earlier
touched an intraday high of $11.59 an ounce. Late in New York on
Monday it was quoted at $11.01 an ounce.
Oil climbed by almost $2 a barrel after a 100 basis point
interest rate cut by the Bank of Australia raised hopes that
other policymakers would follow suit, potentially boosting the
economic outlook and consequently demand for crude. []
Meanwhile European shares slipped sharply, having risen more
than 2.5 percent in early trading, as banks tumbled on reports
of additional funding needs. []
Gold responded by ticking higher. "As the banking sector
continues to fall from one crisis to the next and equities
continue to sell off, there aren't many places to put your
money," said Mitsubishi precious metals strategist Tom Kendall.
"The dollar's a touch weaker, which is helping," he added.
The dollar, a key external driver of gold, weakened slightly
as traders hoped the Bank of Australia's rate cut would be
replicated by other banks, possibly boosting economic activity.
Gold typically moves in the opposite direction to the
dollar, as it is often bought as an alternative investment to
the U.S. currency.
Meanwhile the Reuters-Jeffries CRB Index <.CRB>, a global
commodities benchmark, fell 5 percent to a 13-month low on
Monday.
Base metals prices ticked broadly higher as Australia's rate
cut boosted hopes for other cuts elsewhere, which could
stimulate demand for industrial metals.
Copper trimmed gains, however, after a hefty increase in
LME-monitored stocks of the red metal.
Soft commodities such as sugar and coffee also edged higher,
while grains firmed.
MACRO SUPPORT
Gold traders will be eyeing remarks from Federal Reserve
chairman Ben Bernanke and a speech in Evian from European
Central Bank chief Jean-Claude Trichet later in the session.
European Union finance ministers are also meeting in
Luxembourg to discuss means of reducing market turbulence.
[]
Support for gold prices from the rocky economic situation
looks set to remain firm, analysts say, with prices potentially
climbing further if the outlook worsens.
Physical demand for coins and bars is also strong, while
jewellery buying is expected to increase going into the fourth
quarter.
"In the near term, we expect gold to be highly sensitive to
macro developments, given the potential for safe-haven
investment demand to ride on top of seasonal strength in
physical/fabrication offtake," said Citi Investment Research
analysts in a note.
Platinum and palladium prices also rose, with platinum
climbing 4.5 percent to return to the $1,000 an ounce level for
the first time in three sessions.
Platinum was quoted at $998.50/1,018.50, up from $961.50
late in New York on Monday. Palladium <XPD=> was at
198.50/208.50 an ounce, up from $194.
(Reporting by Jan Harvey; editing by Michael Roddy)
