* Flight to safety boosts gold after S&P downgrades Spain
* Euro, sterling, Swiss franc gold hits record highs
* SPDR gold ETF holdings hit record 1,146.825 T
(Recasts, updates S&P downgrade on Spain, gold hits near-five
month high)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, April 28 (Reuters) - Gold rallied to its
highest level in almost five months on Wednesday despite the
euro's sharp decline, as investors flocked to gold as a safe
haven after Standard & Poor's slashed the credit rating of
Spain's debt.
Uncertainties about the global economy and fears about the
viability of paper currencies also lifted gold to record highs
when priced in euros, sterling, Swiss francs, and to its
firmest level when priced in yen since 1983. []
S&P cut its ratings on Spain one notch to AA from AA-plus,
citing a more protracted period of sluggish growth than
previously expected. []
"The gold market is rallying off of that flight-to-quality
mechanism right now. Yesterday, gold was the lone-standing
positive metal and that was attributable to the fact that,
right now, it's a safe-haven buy," said Adam Klopfenstein,
senior market strategist at MF Global's unit Lind-Waldock.
Spot gold <XAU=> rose to a high of $1,174.18, the loftiest
level since Dec. 4. It was at $1,171.60 an ounce at 11:56 a.m.
EDT (1556 GMT), against $1,168.03 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 $10.50 to
$1,172.70 an ounce.
A day earlier, S&P cut its ratings on Greece to junk status
and also slashed Portugal's.
"This kind of nervousness should be supportive for gold,"
said Societe General analyst David Wilson. "It is exactly the
sort of environment gold thrives in. It has come back to being
that safe haven that we saw at the beginning of last year."
The euro fell to a one-year low after the news at just
above $1.31 <EUR=>.
Concern over the fiscal health of smaller euro zone
economies has boosted gold but pressured the euro this year,
weakening the traditional relationship between the two.
OTHER METALS UNDER PRESSURE
Gold's 7 percent gains this year have come largely on the
back of rising sovereign risk, analysts said.
"Essentially, gold bears no counterparty or currency risk,
being your ideal hedge against sovereign or default risks,"
said 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, hit a record 1,146.825 tonnes
on Tuesday, up 0.609 tonnes.
Other precious metals such as 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
$1,695 an ounce. It was last at $1,700.50 an ounce against
$1,715.50 late on Tuesday.
Palladium <XPD=> was at $533 an ounce against $545.50,
while silver <XAG=> was at $18.07 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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Prices at 12:06 p.m. EDT (1605 GMT)
Last Change Pct 2009 YTD
Chg Close % Chg
US gold <GCM0> 1173.50 11.30 1.0 1096.20 7.1
US silver <SIK0> 18.105 -0.014 -0.1 16.845 7.5
US platinum <PLN0> 1708.80 -12.10 -0.7 1471 16.2
US palladium <PAM0> 535.55 -13.40 -2.4 408.85 31.0
Gold <XAU=> 1172.40 4.37 0.4 1096.35 6.9
Silver <XAG=> 18.10 -0.04 -0.2 16.84 7.5
Platinum <XPT=> 1700.50 -15.00 -0.9 1465.50 16.0
Palladium <XPD=> 533.50 -12.00 -2.2 405.50 31.6
Gold Fix <XAUFIX=> 1161.00 -3.25 -0.3 1104 5.2
Silver Fix <XAGFIX=> 17.96 -20.00 -1.1 16.99 5.7
Platinum Fix <XPTFIX=> 1714.00 1.00 0.1 1466 16.9
Palladium Fix <XPDFIX=> 543.00 8.00 1.5 402 35.1
(Additional reporting by Chris Kelly in New York; Editing by
David Gregorio)
