* Gold hits 2-mth high; silver, palladium at 3-1/2 mth peaks
* Main gold, silver ETF holdings increase
* Euro rises, European shares climb in choppy trade
(Updates prices, adds detail, comment)
By Jan Harvey
LONDON, Sept 1 (Reuters) - Gold and silver hit multi-month
highs in Europe on Wednesday, with gold breaking above $1,250 an
ounce for the first time since late June, as investors bought
the metals amid concerns over the pace of U.S. economic growth.
Spot gold <XAU=> hit a high of $1,254.25 an ounce and was at
$1,252.75 an ounce at 1132 GMT, against $1,248.99 late in New
York on Tuesday. Silver <XAG=> hit its highest since May 17 at
$19.54 an ounce and was later at $19.42 an ounce against $19.34.
Deutsche Bank analyst Daniel Brebner said concerns over
economic activity in the United States were leading to "a
growing acceptance that if conditions remain poor or deteriorate
further, the Fed will move to support growth."
"There is an expectation that deflationary risk is being
actively mitigated, and that the risk longer term is
increasingly one of inflation," he said.
"That, and perhaps longer-term concerns over volatility in
forex and interest rates, is sending some increased capital into
the precious metals."
Concerns over the outlook for the U.S. economy and a return
of worries over euro zone sovereign debt levels have led to
volatility in equities and other assets seen as higher risk in
the past month, boosting gold's appeal as a haven.
European shares advanced on Wednesday to a near two-week
high, lifted by a manufacturing rebound in China and corporate
takeover talk in the market. U.S. stock futures also pointed to
a higher opening on Wall Street. [] []
On the foreign exchange markets, the euro <EUR=> climbed 0.9
percent against the dollar, while the Japanese yen steadied
against the U.S. currency after hefty gains. []
Commodities largely firmed, with oil rising 0.8 percent
after the Chinese data, having fallen in the previous session,
and base metals ticking higher. [] []
ETF HOLDINGS RISE
On the investment side of the bullion market, holdings of
the major gold and silver exchange-traded products, which issue
securities backed by physical stocks of the precious metals,
rose on Tuesday, suggesting healthy investor interest.
The world's largest gold-backed exchange-traded fund, New
York's SPDR Gold Trust <GLD>, added another 4 tonnes of metal to
its stocks, while the largest silver ETF, the iShares Silver
Trust, increased its holdings by more than 30 tonnes. []
The SPDR reversed July's outflows to record a monthly gain
in its holdings in August. Swiss bank UBS said gold holdings of
the 12 ETFs it tracks rose 1.38 million ounces in August.
"While (that) was modest compared to May's 4.8 million
ounces and June's 2.6 million ounces, the trend of rising ETF
appetite is important for market sentiment, and indeed the
longevity of gold's current rally," it said in a note.
"For gold to make a convincing attempt at the previous
record high of $1,265, ETF buying will need to intensify."
Among other precious metals, platinum <XPT=> was at $1,534
an ounce against $1,516.40, while palladium <XPD=> was at
$513.50 against $496.70, off a peak of $516.50.
Palladium rose 4 percent to its highest since mid-May in
earlier trade, lifted by strength in the gold price and weakness
in the dollar, which has helped industrial commodities to climb.
The metal is also broadly supported by its fundamentals,
traders said, with demand from major consumers like carmakers
seen rising as economic growth picks up. "People still like
palladium in the longer term," said one trader.
Investors are continuing to eye the prospect of strike
action in South Africa, source of four out of five ounces of the
world's platinum.
South Africa's National Union of Mineworkers said 8,000
workers at Northam Platinum <NHMJ.J> voted in favour of a
strike. The NUM said notice to strike at Northam will be served
Wednesday afternoon []
(Editing by William Hardy)
