* Safe-haven buying takes gold to highest since Jan 5
* Bullion hits all-time highs in euro, sterling terms
* SPDR Gold Trust holdings hit record for fourth day in row
(Updates comments and prices)
By Jan Harvey
LONDON, Jan 23 (Reuters) - Gold jumped more than 3 percent
on Friday to its highest in nearly three weeks as volatility on
currency markets drove investors to buy bullion.
The precious metal reached record highs in both sterling and
euro terms.
Spot gold <XAU=> rose as high as $883.30 an ounce and was at
879.00/881.00 an ounce at 1457 GMT, against $855.55 late in New
York on Thursday. It rose to an all-time high of 685.70 in euro
terms <XAUEUR=R>, and a record 648.51 pounds when priced in
sterling <XAUGBP=R>.
"There is ongoing nervousness in the market about the
banking sector," said Tom Kendall, precious metals strategist at
Mitsubishi. "If you are looking to park your cash...there are
not many options around and gold is one option."
The dollar strengthened to a six-week high against the euro,
as investors worried about the outlook for the euro zone
economy. []
Key business surveys showed on Friday that euro zone
services and manufacturing activity declined at a slightly
slower pace in January, a touch better than forecasts, but
remained deep in recessionary territory. []
"Investors are getting out of currencies and getting into
gold," said Simon Weeks, director of precious metals at the Bank
of Nova Scotia.
While strength in the dollar against the euro tends to weigh
on gold, which is often bought as a hedge against weakness in
the U.S. currency, this correlation was trumped by interest in
bullion as a safe haven.
"The relationship between gold and the U.S. dollar appears
to be broken at present," said Fairfax analyst John Meyer.
"Normally a stronger dollar pushes down gold."
"Clearly there is investment money flooding in due to the
perceived security of gold," he said.
The other main external driver of gold, oil prices, softened
on Friday, falling below $43 a barrel after a larger than
expected rise in U.S. crude stocks, and with bearish economic
data dampening hopes for a resurgence in demand. []
ETF HITS RECORD
Demand for investment products such as coins and bars and
physically-backed vehicles such as exchange-traded funds has
been strong this week.
"The physical premia seen on the gold market have been very
strong in recent weeks, suggesting there is relatively healthy
demand," said BNP Paribas analyst Michael Widmer.
The world's largest bullion-backed exchange-traded fund, New
York's SPDR Gold Trust, said its holdings rose to a record for
the fourth consecutive session on Thursday, climbing 1.6 percent
or 13.15 tonnes to a 819.11 tonnes. []
SPDR took over from the Bank of Japan as the world's seventh
largest holder of gold in December.
However, demand for gold jewellery in traditionally key
markets such as India and the Middle East is slack as prices
remained high [].
Silver <XAG=> was at $11.36/11.44 an ounce from $11.38 late
in New York on Thursday.
Platinum <XPT=> firmed to $928.00/938.00 an ounce from $926,
while palladium <XPD=> was slightly higher at $183.00/188.00 an
ounce from $182.
Both metals have suffered from a fall in demand from
carmakers, who account for around half of annual platinum
consumption. Platinum and palladium are key components in
catalytic converters.
(Additional reporting by Humeyra Pamuk, Editing by Peter
Blackburn)
