PRECIOUS-Gold flies to record, investors seek safety

                                
 * Euro debt problems a "wake up" call
                                
 * Low rates mean low opportunity cost of holding gold
                                
 * Bullion extends record high in euro, pounds, Swiss francs
                                
 
                                
 (Updates prices, adds comment, detail)
                                
 By Pratima Desai and Jan Harvey
                                
 LONDON, May 12 (Reuters) - Gold surged to a record high on
Wednesday as investors piled in, seeking safety from turmoil in
government bond markets and the risks of Greece's debt crisis
spreading to other countries.
                                
 Spot gold <XAU=> hit $1,244.45 an ounce, a gain of nearly 20
percent since early February. It was bid at $1,241.15 an ounce
at 1209 GMT from $1,232.05 late in New York on Tuesday. U.S.
gold futures <GCM0> hit a record $1,245.40 an ounce.
                                
 Investor buying this week was triggered by doubts that a $1
trillion rescue package to contain an escalating debt crisis in
Europe would be enough to cut the chances of sovereign default
in the euro zone. [ID:nN10227661]
                                
 Gold priced in euros <XAUEUR=R> extended its record high to
982.51 euros an ounce on Wednesday, and has risen 28 percent
since early February, outstripping dollar gold's climb.
                                
 "The recent move in gold has been all about the gradually,
and then more rapidly escalating fiscal crisis in Europe," said
Nic Brown, an analyst at Natixis. 
                                
 "Clearly, the largest move has taken place in euros. For me,
this is a classic illustration of gold being a store of value in
times of crisis. In particular, it is useful for investors in
the particular currency which is suffering the crisis."
                                
 Investors and many traders think the scale of Greece's
fiscal problems could make it tempting for the country to
default, despite the package, which could start a run on the
debt of countries such as Spain, Portugal and Italy.
                                
 That was partly offset by news that European central banks
were buying Portuguese, Irish and Greek government bonds, but
investors and analysts are not convinced. [ID:nMAT012339]
                                
 "Gold is benefiting as euro zone government bonds lose some
of their safe-haven appeal. With governments tightening budgets,
it will take the pressure off central banks to hike," said David
Thurtell, analyst at Citi. [INT/RATE]
                                
 "With interest rates around the world set to stay relatively
low, the opportunity cost of investing in gold will remain low."
                                
 
                                
 TOO MUCH UNCERTAINTY
                                
 Gold priced in sterling <XAUGBP=R> hit a record 834.53
pounds, and in Swiss francs <XAUCHF=R> a record 1,381.16 francs.
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For graphic showing gold priced in other currencies click:
http://graphics.thomsonreuters.com/10/GLD_CRRJH0510.gif 
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 The scale of investor buying can be seen in the holdings of
the world's largest gold-backed exchange-traded fund, the SPDR
Gold Trust <GLD>, which said its holdings stood at a record high
of 1,192.150 tonnes as of May 11.
                                
 However, dealers noted a pick up in sales of scrap in Asia,
which could limit gains, but any correction could be limited.
                                
 "It is obvious that the ... support package has not dampened
the longer term fear level, there is simply too much uncertainty
at the moment," SEB Commodity Research said in a note.
                                
 "In Europe, retail sales of coins and bars are currently
reaching levels not seen since the peak of the financial crisis
and speculative futures positions keep increasing in the U.S."
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For a graphic showing the timeline of gold's rise to record
highs click: http://graphics.thomsonreuters.com/10/GLD_TMLN.html
For a graphic showing the technical outlook for gold click:
http://graphics.thomsonreuters.com/gfx/WT_20101205115706.jpg
For graphic showing gold's moves against the dollar click:
http://graphics.thomsonreuters.com/gfx/LP__20101205110500.jpg
For graphic showing inflation-adjusted gold price click:
http://graphics.thomsonreuters.com/10/GLD_PRCINF0510.gif
For graphic showing 2010 commodity price performance
http://graphics.thomsonreuters.com/10/CMD_PRFG0510.html
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 Spot silver rose to $19.60 an ounce, its highest since March
2008. It was last at $19.54 from $19.28 late on Tuesday.
                                
 The world's largest silver-backed exchange-traded fund, the
iShares Silver Trust <SLV>, said its holdings rose to 9,115.15
tonnes as of May 11, up 27.43 tonnes from the previous business
day. [ID:nSGE64B06W]
                                
 Platinum <XPT=> was bid at $1,709 an ounce from $1,702 and
palladium <XPD=> at $533 from $532 on Tuesday.
 (Editing by James Jukwey)