* Gold hits record high above $1,230/oz on safe-haven play
* European rescue fails to rest sovereign debt crisis fear
* Gold's technical outlook points to further gains
* Silver prices track gold up to five-month highs
* Coming up: U.S. federal budget due Wednesday
(Recasts, adds comments, updates prices to market close)
By Frank Tang
NEW YORK, May 11 (Reuters) - Gold jumped nearly 3 percent
to an all-time high at above $1,230 an ounce on Tuesday, as
traders sought safety after a $1 trillion European rescue
failed to put to rest fears of euro zone debt contagion.
After trading modestly higher in choppy early activity,
bullion prices kicked above their previous $1,226.10 peak set
on Dec. 3 after U.S. stock markets turned negative at
mid-afternoon, resuming a safe-haven rally that had threatened
to stall with Monday's brief revival of risk appetite.
Silver also rose 4.5 percent to a five-month peak, posting
its biggest one-day percentage gain in six months, while
platinum and palladium were little changed.
Even as current prices have fully incorporated price
projections of a bullish inverted head-and-shoulder pattern,
bullion is still far away from its inflation adjusted record at
over $2,200, analysts said. []
"We think there is an upside risk for gold and it has the
potential to go to $1,600 (an ounce) within a year or so," said
Bart Melek, global commodity strategist at BMO Capital
Markets.
"We think there are continued sovereign risk issues, even
after the European debt bailout. Buying gold or precious metals
generally as a hedge will continue until this environment
stabilizes somewhat."
After touching a record $1,233.65 an ounce, spot gold
<XAU=> rose $30.85 or 2.6 percent to $1,232 an ounce at 5:05
p.m. EDT (2105 GMT), against $1,201.90 late on Monday.
U.S. gold futures for June delivery <GCM0> on the COMEX
division of the NYMEX was up more than $30 at above $1,230 an
ounce. Earlier, June settled at $1,220.30 an ounce.
Gold looked primed for a run at the previous record after a
rush of retail buying last week, and its slight dip on Monday,
when the S&P 500 index rallied 4 percent as risk markets
cheered the $1 trillion emergency aid package.
"While this provided at least a temporary band aid for the
sovereign debt crisis, there is still a potential for
significant problems and the need to potentially do more," said
Bill O'Neill, partner at New Jersey-based commodities firm
LOGIC Advisors.
"I just don't think there is a high level of confidence.
This package bides time but it doesn't indicate that the crisis
is necessarily over, and that's what gold is reflecting."
Market watchers said the rescue package could be too little
too late to solve a global sovereign debt crisis.
"Some investors around the world are looking for a home for
euros, and gold seems to be the place," said Fred Dickson,
chief market strategist at Oregon-based D.A. Davidson & Co.
Some analysts also doubted the long-term viability of the
euro and potential adverse economic implications given the
massive size of the aid deal.
"Gold has now consistently shown that it does not have to
follow the so-called traditional inverse relationship with the
dollar. It is front and center assuming its role as the
currency of choice," O'Neill said.
Over the past three weeks, gold has sharply inverted its
typical inverse correlation with the dollar. The metal is now
instead trading at a positive 0.84 correlation for the past 25
days.
The metal also rose to its strongest since May 2009, as the
gold/oil ratio rose to over 16.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For a graphic showing gold's moving in sync with the
dollar, click:
http://link.reuters.com/kyp63k
For a graphic showing gold rises to strongest in a year
against oil, click:
http://link.reuters.com/hyp63k
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
Gold priced in euros <XAUEUR=R> and Swiss francs <XAUCHF=R>
also hit record highs at 975.65 euros an ounce and 1,370.78
francs an ounce respectively.
SILVER'S BIGGEST ONE-DAY GAIN SINCE NOV.
Silver <XAG=> hit a five-month high at $19.42, and was last
at $19.28 an ounce against $18.44, boosted by short-term
investment demand, analysts said.
Platinum group metals were largely flat after Monday's
rebound. Platinum <XPT=> was at $1,702 an ounce against $1,693
and palladium <XPD=> at $532 against $529.
Close Change Pct 2009 YTD
Chg Close % Chg
US gold <GCM0> 1220.30 19.5 1.6 1096.20 11.3
US silver <SIN0> 19.294 0.742 4.0 16.845 14.5
US platinum <PLN0> 1700.80 7.30 0.4 1471.00 15.6
US palladium <PAM0> 532.20 7.70 1.5 408.85 30.2
Prices at 5:35 p.m. EDT (2135 GMT)
Gold <XAU=> 1232.05 30.15 2.5 1096.35 12.4
Silver <XAG=> 19.28 0.84 4.6 16.84 14.5
Platinum <XPT=> 1702.00 9.00 0.5 1465.50 16.1
Palladium <XPD=> 532.00 3.000 0.6 405.50 31.2
Gold Fix <XAUFIX=> 1222.50 13.50 1.1 1104 10.7
Silver Fix <XAGFIX=> 18.42 -4.00 -0.2 16.99 8.4
Platinum Fix <XPTFIX=> 1689.00 3.00 0.2 1466 15.2
Palladium Fix<XPDFIX=> 521.00 1.00 0.2 402 29.6
(Additional reporting by Carole Vapoean in New York, Jan
Harvey in London; Editing by Lisa Shumaker)
