* Increased asset allocation into gold fuels rally
* Indian gold, euro-priced gold hit records
* Silver hits highest level since Oct. 1
(Recasts, updates with quotes, closing prices, adds NEW YORK to
dateline)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Jan 30 (Reuters) - Gold rallied to a near
four-month high on Friday, fueled by flight-to-quality buying and an
overall increase in asset allocation toward bullion as an
investment.
"There is a major safe haven buying in the gold. We are seeing
gold appreciate against all currencies. The gold market is certainly
anticipating a much bigger systemic problem down the road," said
Frank McGhee, head precious metals trader of Integrated Brokerage
Services.
Spot gold <XAU=> was at $926.00 an ounce at 2:43 p.m. (1943
GMT), up 2.1 percent from $906.75, its last trade on Thursday in New
York. It rallied to a high of $930.40, which marked its loftiest
level since Oct. 10.
Gold priced in euros <XAUEUR=R> hit a record high of 725.34
euros.
U.S. gold futures for April delivery <GCJ9> settled up $21.90,
or 2.4 percent, at $928.40 an ounce on the COMEX division of the New
York Mercantile Exchange.
Gold is being supported by interest in the precious metal as a
haven from risk.
Fund managers said that investors overall were allocating more
of their portfolio money into gold instead of other asset classes
such as stocks, and the move fueled the yellow metal's latest
rally.
Gold has risen 3.5 percent this week as investors have scrambled
for the safety of gold and bullion-backed assets such as
exchange-traded funds.
"The ETFs were up another 15 tonnes yesterday," Simon Weeks,
director of precious metals at the Bank of Nova Scotia, said, adding
safe haven demand was driving the market.
The world's biggest gold-backed ETF, New York's SPDR Gold Trust
<GLD>, said its holdings jumped more than 10 tonnes on Thursday to a
record 843.59 tonnes. []
SPDR's holdings have risen more than 63 tonnes or 8 percent
since Dec. 31.
Market talk of China taking an interest in gold as an
alternative to U.S. Treasuries, and of a European fund buying
bullion, also helped support prices.
Gold rose in spite of a two percent drop of U.S. equities,
ignoring a lower appetite for risky assets.
The dollar rose against the euro after weak euro zone data and
less-than-stellar U.S. economic reports heightened fears that the
global downturn could be prolonged and even deeper than many
initially feared. []
Although gold usually moves in the opposite direction to the
dollar, the negative correlation between the two has broken down in
recent weeks as both assets gained on risk aversion.
INDIAN GOLD HITS RECORD
Jewellery demand remains hamstrung by high prices. In India, the
world's biggest bullion market, gold futures touched an all-time
high of 14,448 rupees per 10 grams, deterring buyers.
[]
Russia's gold output rose by 13.3 percent to 184.49 tonnes last
year, chiefly on the back of improving mine output, the Russian Gold
Industrialists Union said. []
Silver <XAG=> tracked gold, rising to a peak of $12.65 an ounce,
its highest price since Oct. 1. It ended at $12.56 an ounce, up 2
percent from its previous close of $12.31.
Silver ETFs have also risen sharply this year, with the largest,
the iShares Silver Trust <SLV.A>, up 660 tonnes or 10 percent in the
year to date.
Among other precious metals, platinum <XPT=> was at $982.00 an
ounce, up 1 percent from its last finish of $972.50, while palladium
<XPD=> was at $190.50 an ounce, down 0.5 percent from its previous
close of $191.50.
A Reuters survey of 56 precious metals analysts and traders
showed most expected the platinum group metals to post significant
losses this year as the global economic slowdown pressures demand.
[]
(Reporting by Frank Tang; Editing by Marguerita Choy)
