* ECB cuts key interest rate to 1.00 pct
* Risk appetite lifts euro to 1-mth high versus dollar
(Adds comment, updates prices)
By Jan Harvey
LONDON, May 7 (Reuters) - Gold was firmer on Thursday as the
prospect of traders buying bullion as an inflation hedge
supported the market, but gains were pared as bets that the
global slump could be stabilising dented its safe-haven cachet.
The more industrial precious metals -- platinum, palladium
and silver -- rose in line with oil and industrial metal prices,
which were in turn swept up by rallying share prices.
"The slower pace of deterioration is not only good for
equities but is helping the broad-based commodities story," said
CMC Markets analyst Ashraf Laidi. "Commodities are really
rallying, they are really embracing this green-shoot recovery."
Spot gold <XAU=> was bid at $911.40 an ounce at 1437 GMT,
against $909.90 an ounce late in New York on Wednesday. It
rallied to a five-week high of $922.30 an ounce earlier as a
break through the previous day's high triggered buy orders.
U.S. gold futures for June delivery <GCM9> on the COMEX
division of the New York Mercantile Exchange rose $1.60 to
$912.60 an ounce.
The euro rose to a one-month high against the dollar after
the ECB opted to slash borrowing costs to a record low 1 percent
as expected, and said it intends to buy euro-denominated covered
bonds. []
Plans for modest asset buying encouraged investor
risk-taking, analysts said. []
Stocks were sharply higher after the announcement, with the
pan-European FTSEurofirst 300 <FTEU3> set for its first
seven-day gains since August 2007 and world stocks setting 2009
highs. []
Dealers are now looking ahead to the results of stress tests
on 19 U.S. banks which will be released at 2100 GMT. Treasury
Secretary Tim Geithner said in the New York Times he expects
banks to pay back more than the $25 billion of government rescue
funds he had previously estimated. []
INFLATION
Standard Bank analyst Walter de Wet said expectations the
financial crisis was bottoming out may turn attention away from
gold as a haven, but boost 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.
Investment demand for gold remained sluggish, with holdings
of the world's largest gold-backed exchange-traded fund, the
SPDR Gold Trust <GLD>, declining 0.36 tonnes on Wednesday.
It has seen an outflow of 23.28 tonnes in the last four
weeks, compared with inflows of nearly 90 tonnes in the
preceding period.
The largest silver-backed ETF, the iShares Silver Trust
<SLV>, said its holdings declined 61.28 tonnes on Wednesday.
Silver prices rose to a new 10-week high of $14.13 an ounce
on Thursday, tracking gold higher. Spot silver <XAG=> was later
bid at $13.69 an ounce against $13.70.
Among other precious metals, platinum <XPT=> was bid at
$1,152.50 an ounce against $1,133.50, while palladium <XPD=> was
at $236 an ounce against $226.50. Earlier, palladium rose more
than 7 percent to a peak of $243, its highest since September.
Expectations of better economic prospects, which bode well
for demand for industrial metals, are also supporting prices.
Platinum and palladium are mainly used as components in
catalytic converters, and prices have dropped sharply since the
downturn sparked a drop in demand for cars.
(Editing by Sue Thomas)
