* EU ministers to discuss increasing capacity for rescue
* Gold up on oil's 2 percent rally
* China's premiums for gold bars jump to 2-year high
* Coming up: US producer prices, jobless claims Thursday
(Recasts, adds comments, updates prices to market close)
By Frank Tang
NEW YORK, Jan 11 (Reuters) - Gold prices rose for a second
day on Tuesday on a rally in oil and as deepening worries over
the severity of the European debt crisis prompted safe-haven
buying.
Signs that Europe is still struggling to overcome its
fiscal problems highlighted gold's appeal as an alternative
investment, after the metal notched its biggest weekly decline
since May last week on improving U.S. economic data.
European finance ministers will discuss increasing the
effective lending capacity of their financial rescue fund next
week, as Portugal defied pressure to seek a bailout. Japan,
following in the footsteps of China, promised to buy euro zone
bonds this month to help steady the single currency.
[]
"Even though Japan is getting in the fray, the euro really
hasn't been able to manage a recovery. It highlights the fact
that there is a crisis and there will be further problems,"
said Bill O'Neill, managing partner at commodities firm LOGIC
Advisors.
O'Neill also cited oil's surge as a factor behind the rise
in gold. U.S. crude futures <CLc1> rallied 2 percent to settle
above $91 a barrel on output disruptions and colder weather.
Gold is often viewed as a hedge against inflation. []
Spot gold <XAU=> rose 0.6 percent to $1,382.90 by 3:12 p.m.
EST (2012 GMT), while U.S. gold futures for February delivery
<GCG1> settled up $10.20 at $1,384.30. The metal is about 4
percent off December's record high of $1,430.95.
Silver <XAG=> rose for a second session, up 1.7 percent on
the day at $29.54 an ounce.
COMEX gold futures volume rose more than 5 percent above
its 30-day average, but silver was about 25 percent lower,
preliminary Reuters data showed.
Gold's recent price decline has spurred demand in India and
China, a top bullion consumer ahead of the Lunar New Year in
early February, pushing premiums for gold bars to their highest
in two years. []
China's inflation raced to a 28-month high of 5.1 percent
in November, and it is unclear whether policy steps the
government is taking will calm prices, benefiting gold.
After several weeks of almost unrelenting outflows, some of
the larger exchange-traded funds backed by physical gold have
also seen a pick-up in investor demand, despite the decline in
the euro, which would normally erode appetite for gold.
The world's largest gold-backed exchange-traded fund, SPDR
Gold Trust <GLD>, said its holdings rose for the first time
since mid-December to 1,272.682 tonnes by Jan. 10. []
EURO ZONE DEBT CRISIS
Gold rose as the euro climbed on talk of increased
Portuguese bond buying by the European Central Bank, but it
struggled to hold session peaks given nervousness over a heavy
schedule of debt issuance by southern European countries this
week. []
Concerns in the fixed-income markets over the likelihood of
an international bailout for Portugal, which would be the third
in a year after the rescues of Greece and Ireland, have
undermined investor confidence and given gold a boost.
The focus this week is on whether Lisbon will be able to
raise funds in the debt market on Wednesday, or be forced to
turn to the European Union and International Monetary Fund for
financial aid.
Gold, which rose 30 percent last year, has been a key
beneficiary of investor concern over the fallout from the euro
zone debt crisis.
"Where you have governments that are overindebted and need
to get themselves out of that problem ... they can try to
inflate their way out of difficulty, which is where you'd want
to be holding gold instead, or can go down a route of fiscal
retrenchment," Natixis commodities analyst Nic Brown said.
Improved U.S. auto sales and ongoing supply worries lifted
platinum group metals, which are largely consumed in
autocatalysts.
Platinum <XPT=> rose for a fourth consecutive day, up 1.6
percent at $1,765.50 an ounce, while palladium <XPD=> gained 4
percent, up for a second day, at $780.
Prices at 3:18 p.m. EST (2018 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCG1> 1384.30 10.20 0.7% -2.6%
US silver <SIH1> 29.499 0.638 0.0% -4.6%
US platinum <PLJ1> 1767.60 24.60 1.4% -0.6%
US palladium <PAH1> 783.75 34.10 4.5% -2.4%
Gold <XAU=> 1382.30 7.85 0.6% -2.6%
Silver <XAG=> 29.52 0.47 1.6% -4.3%
Platinum <XPT=> 1763.49 25.50 1.5% -0.2%
Palladium <XPD=> 780.72 30.75 4.1% -2.3%
Gold Fix <XAUFIX=> 1374.00 -7.00 -0.5% -2.6%
Silver Fix <XAGFIX=> 29.54 75.00 2.6% -3.6%
Platinum Fix <XPTFIX=> 1758.00 10.00 0.6% 1.6%
Palladium Fix <XPDFIX=> 778.00 16.00 2.1% -1.6%
(Additional reporting by Amanda Cooper in London and Lewa
Pardomuan in Singapore; Editing by Dale Hudson)
