* Technical buying sparks brief rally above $920/oz
* Stock markets rally, dollar firms versus the euro
* ECB seen cutting rates to 1.00 pct, statement eyed
(Updates prices, releads)
By Jan Harvey
LONDON, May 7 (Reuters) - Gold rose more than 1 percent on
Thursday as a break through the previous day's high sparked
technical buying.
Prices are also being supported by uncertainty ahead of a
European Central Bank rates announcement at 1145 GMT and the
result of U.S. bank stress tests later in the session, analysts
said.
Spot gold <XAU=> rose to a high of $922.30 and was bid at
$918.05 an ounce at 1130 GMT, against $909.90 an ounce late in
New York on Wednesday.
Later on Thursday the results of stress tests on 19 U.S.
banks will be released. Treasury Secretary Tim Geithner said on
Wednesday none of the banks screened face insolvency, although
reports suggest many need more capital. []
Standard Bank analyst Walter de Wet said hopes that the
financial crisis is bottoming out may be turning attention away
from gold as a safe haven, but boosting its appeal as an
inflation hedge.
"People who are bullish on gold would probably see this as a
time to buy because, if indeed the recovery is close, we might
see inflationary pressures creeping in sooner rather than
later," he said.
"In the short term, people might also be hedging themselves
against what the ECB will do -- whether they will resort to
massive quantitative easing or not," he added.
The ECB, which is due to release a decision on interest
rates at 1145 GMT, is widely seen cutting rates to 1.00 percent.
The announcement will be followed by ECB president
Jean-Claude Trichet's news conference, which will be closely
watched for news of any additional step the bank is expecting to
take to get the euro zone economy back on its feet.
Gold's gains were limited, however, by a rally in European
shares after a strong session in Asia, with traders optimistic
over the outlook for U.S. banks. []
The dollar meanwhile was little changed against the euro
ahead of the ECB decision. []
SLUGGISH
Investment demand for gold remained sluggish, with holdings
of the world's largest gold-backed exchange-traded fund, the
SPDR Gold Trust <GLD>, declining by 0.36 tonnes on Wednesday.
The trust has seen an outflow of 23.28 tonnes in the last
four weeks, compared to inflows of nearly 90 tonnes in the
preceding period.
The largest silver-backed ETF, the iShares Silver Trust
<SLV>, also said its holdings declined 61.28 tonnes on Wednesday
to 8,348.18 tonnes.
Silver prices rose to a new ten-week high of $14.10 an ounce
on Thursday, tracking gold higher. Spot silver <XAG=> was later
bid at $13.95 an ounce against $13.70.
Among other precious metals, spot platinum <XPT=> was bid at
$1,160 an ounce against $1,133.50, while spot palladium <XPD=>
was bid at $233.50 an ounce against $226.50.
The metals benefited from strong Japanese buying on the
first day of trade on TOCOM, the Tokyo commodities bourse,
analysts said, after the Golden Week holiday.
Hopes better economic prospects will bode well for demand
for industrial metals are also supporting prices.
Platinum and palladium are primarily used as components in
catalytic converters, and have dropped sharply in price since
the downturn sparked a drop in car demand.
(Reporting by Jan Harvey; Editing by Sue Thomas)
