* Fears grow that euro zone sovereign risk is spreading
* Euro, sterling, Swiss franc gold near record highs
* SPDR gold ETF holdings hit record 1,146.825 T
(Updates, adds comment, changes dateline from SINGAPORE)
By Jan Harvey
LONDON, April 28 (Reuters) - Gold eased in Europe on
Wednesday from Tuesday's 2010 high as the dollar reached a
one-year peak against the euro, but the metal remains firmly
supported by fears euro zone sovereign risk is spreading.
Spot gold <XAU=> was bid at $1,164.30 an ounce at 0929 GMT,
against $1,169.03 late in New York on Tuesday. U.S. gold futures
for June delivery <GCM0> on the COMEX division of the New York
Mercantile Exchange rose $2.90 to $1,165.10 an ounce.
Gold priced in euros, sterling and Swiss francs held near
Tuesday's record highs after Standard & Poor's cut its ratings
on Greece to junk status and downgraded Portugal, fuelling
buying of gold as a haven from financial risk.
"Gold is performing as a currency in its own right, and that
status is only getting enhanced every day at the moment," said
Simon Weeks, head of precious metals at the Bank of Nova Scotia.
"It is no real shock that Greece has been downgraded again
and Portugal was downgraded, (but) the market was spooked big
time yesterday afternoon."
"It will be hard for gold in dollar terms, but it will make
new highs at some point," he said. "The trend in euros,
sterling, yen and everything else will continue."
Concern over the fiscal health of smaller euro zone
economies has boosted gold but pressured the euro this year,
causing the traditional relationship between the two to weaken.
The euro <EUR=> hit a one-year low versus the dollar on
Wednesday, and is down more than 8 percent so far in 2010. At
the same time, gold has risen 6 percent. []
S&P cut Greece's sovereign credit rating to junk status on
Tuesday and downgraded Portugal's rating to A-minus, leading to
a further rise in euro zone peripheral bond yields.
[]
Portuguese and Spanish 10-year yield spreads over Bunds hit
euro lifetime highs, meaning the premium investors demand to
hold those countries' debt over German debt is at its highest
since the launch of the euro.
COMMODITIES UNDER PRESSURE
Other assets came under heavy pressure from risk aversion on
Wednesday. Commodities like oil and base metals slid as
investors avoided assets seen as higher risk. [] []
European shares hit a seven-week low after their biggest
one-day percentage fall in five months a day earlier, while the
VDAX-NEW volatility index <.V1XI> rose 13 percent to an 11-week
high after surging nearly 19 percent on Tuesday. []
"Essentially, gold bears no counterparty or currency risk,
being your ideal hedge against sovereign or default risks,"
saitd VTB Capital analyst Andrey Kryuchenkov in a note.
"Bullion will continue to draw support from its safe haven
appeal, with euro zone fears intensifying from here."
Holdings of the world's largest gold-backed exchange-traded
fund, New York's SPDR Gold Trust <GLD>, hit a record 1,146.825
tonnes on Tuesday, up 0.609 tonnes. []
Other precious metals like silver, platinum and palladium,
which are more industrial in use than gold, succumbed to selling
pressure, however.
Platinum <XPT=> hit its lowest in a week on Wednesday at
$1,705.50 an ounce, down 2 percent from Friday. It was later at
$1,709.50 an ounce against $1,715.50 late on Tuesday.
Palladium <XPD=> was at $532 an ounce against $545.50, while
silver <XAG=> was at $18.06 against $18.14.
"There is no doubt that sentiment for platinum and palladium
is less emphatic than was the case earlier this month," said UBS
analyst Edel Tully in a note.
"Considering the overtime drive both metals have been on
since March 25, once the liquidation tide returned, platinum and
palladium were wide open to heavy losses."
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For an interactive graphic showing the relative performance
of various commodities in 2010, click on:
http://graphics.thomsonreuters.com/10/CMD_PRFG0410.swf
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(Reporting by Jan Harvey; Editing by Amanda Cooper)
