* Flight to quality boosts gold; S&P cuts Greece, Portugal
* Sets 2010 high in dollars, records in euros, sterling
* SPDR gold ETF holdings rise 6 T to record 1,146.216 T
(Recasts, adds S&P cuts Greek rating to junk, updates prices;
adds NEW YORK dateline/byline)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, April 27 (Reuters) - Gold prices rallied
to their highest level in 2010 on Tuesday, defying a sharply
stronger dollar, as the downgrades of sovereign credit ratings
of Portugal and Greece triggered a flight to safety.
Economic uncertainties and fears about the viability of
paper currencies also lifted gold to record highs when priced
in euros, sterling, Swiss francs, and to a 2010 peak in terms
of Australian dollars.
"The investors are risk averse at this point, and they are
trying to flock to something that is more stable, such as
gold," said David Lee, a trader at Heraeus Precious Metals
Management in New York.
Rating agency Standard and Poor's slashed Greek debt to
junk status on Tuesday, and also downgraded Portugal's rating,
as fears of a Greek debt default grew. []
The news sparked a global equities market sell-off, with
Wall Street down 2.5 percent. []
"There are some concerns that the euro zone might not
recover until much later. People who are betting on the
recovery story, which was driving up metal prices, are taking a
second look," Lee said.
Spot gold <XAU=> hit a peak of $1,172.05, its highest level
since Dec. 4. It was at $1,170.95 at 3:53 p.m. (1953 GMT),
against $1,153.38 late in New York on Monday.
It hit record highs in euros <XAUEUR=R> at 889.53 euros an
ounce, in sterling <XAUGBP=R> at 768.86 pounds, and in Swiss
francs <XAUCHF=R> at 1,274.72 francs.
Standard & Poor's downgrades fanned sovereign risk fears
about the entire euro zone, prompting investors to flee to the
metal in fear-driven trade.
"Gold prices are rising on the back of presumably higher
sovereign risks in the euro zone after the latest downgrade of
Portugal ratings by S&P," said Commerzbank analyst Eugen
Weinberg.
"Gold seems to be defying the traditional pattern --
stronger dollar, lower gold prices -- over the last weeks,
pointing to stronger perception of gold as an alternative
currency."
Concern over sovereign risk in the euro zone, chiefly
debt-laden Greece, has helped gold rise nearly 7 percent this
year, despite a 7 percent fall in the euro versus the dollar,
which would normally weigh on gold.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For a graphic showing the breakdown of gold's inverse
correlation with the dollar index in 2010. click:
http://link.reuters.com/faq69j
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
U.S. gold futures for June delivery <GCM0> on the COMEX
division of the New York Mercantile Exchange settled up $8.20
at $1,162.20 an ounce.
Greece is seeking help with its debts from the euro zone
and the International Monetary Fund. Germany said on Monday it
was ready to commit funds, but demanded Athens take painful
austerity measures.
The spread between Greek and German government bond yields
hit its widest in 12 years on Tuesday, showing premiums
demanded by investors to hold Greek debt are rising.
SPDR GOLD TRUST HOLDINGS UP 6 TONNES
Strong investment demand took holdings of the world's
largest gold-backed exchange-traded fund, New York's SPDR Gold
Trust <GLD>, rose more than 6 tonnes to a record 1,146.216
tonnes as of Monday, the fund said. []
Analysts said Greece's debt crisis could spill over to
other euro zone countries despite an EU rescue package,
prompting investors to put their money in safer investment
alternatives, such as gold.
Traders are now awaiting the outcome of a two-day monetary
policy meeting of the U.S. Federal Reserve, which starts on
Tuesday. The Fed is expected to hold interest rates unchanged,
but will discuss how to unwind its massive stimulus package.
Other precious metals dropped because of their industrial
uses. Silver <XAG=> was at $18.20 an ounce against $18.26,
platinum <XPT=> at $1,714.50 an ounce against $1,743, and
palladium <XPD=> at $547.50 against $564.50.
Close Change Pct 2009 YTD
Chg Close % Chg
US gold <GCM0> 1162.20 8.2 0.7 1096.20 6.0
US silver <SIK0> 18.119 -0.218 -1.2 16.845 7.6
US platinum <PLN0> 1720.90 -24.10 -1.4 1471.00 17.0
US palladium <PAM0> 548.95 -17.45 -3.1 408.85 34.3
Prices at 4:03 p.m. EDT (2003 GMT)
Gold <XAU=> 1169.95 16.57 1.4 1096.35 6.7
Silver <XAG=> 18.19 -0.07 -0.4 16.84 8.0
Platinum <XPT=> 1717.50 -25.50 -1.5 1465.50 17.2
Palladium <XPD=> 547.50 -17.000 -3.0 405.50 35.0
Gold Fix <XAUFIX=> 1149.50 -2.75 -0.2 1104 4.1
Silver Fix <XAGFIX=> 18.16 -19.00 -1.0 16.99 6.9
Platinum Fix <XPTFIX=> 1722.00 25.00 1.4 1466 17.5
Palladium Fix<XPDFIX=> 550.00 12.00 2.1 402 36.8
(Editing by Walter Bagley)
