* Concern over risk contagion hits euro, commodities
* SPDR gold ETF holdings hit record 1,166 T
* Coming up: ECB rates decision, press conference
(Updates, adds comment, changes dateline from SINGAPORE)
By Jan Harvey
LONDON, May 6 (Reuters) - Gold prices rose towards $1,180 an
ounce in Europe on Thursday and hit record highs in euro and
Swiss franc terms as investors worried Greek-style debt problems
would spread elsewhere in the euro zone.
Gold is becoming increasingly attractive as a hedge against
sovereign risk and the resulting volatility in the foreign
exchange markets, analysts said.
Spot gold <XAU=> was bid at $1,177.25 an ounce at 0935 GMT,
versus $1,174.20 late in New York on Wednesday. Euro-priced gold
<XAUEUR=R> hit a high of 922.50 euros an ounce, and bullion in
Swiss franc terms <XAUCHF=R> peaked at 1,319.79francs an ounce.
Investment demand for bullion was strong, with the world's
largest gold-backed exchange-traded fund, New York's SPDR Gold
Trust <GLD>, reporting a 7-tonne rise in its holdings to a
record 1,166.002 tonnes on Wednesday. []
"People are concerned about sovereign credit risk and this
is going to stay around for some time. This type of risk is not
solved in a week, or a month," said Standard Bank analyst Walter
de Wet. "Gold has performed very well, and it is going to
continue to perform well if things get worse."
He said, however, that persistent strength in the dollar,
weakness in jewellery demand and the weight of scrap returning
to the market are likely to cap gold's gains in the longer term.
Asian investors sold back some gold bars on Thursday as
bullion prices held near this year's peak, while jewellers in
main consumer India turned their back on the physical market
despite the wedding season. []
Meanwhile, escalating concerns that Greece's debt crisis may
spill over into other euro zone states knocked the euro to a
14-month low against the dollar on Thursday. European leaders
warned on Wednesday that debt problems may spread. []
Dollar strength usually weighs on gold, but this factor is
for the moment being outweighed by risk buying.
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APPETITE GROWS
Euro zone states are currently finalising details of a 110
billion euro aid package for Greece, while the country struggles
to implement the austerity measures attached to the aid.
"Growing sovereign risk is lifting our appetite for gold,"
said Morgan Stanley in a note. "Although gold has already
rallied, trading at its highest in 2010, and reaching nominal
highs in euros, we see further upside from current levels."
All eyes are now on the ECB, which will announce the outcome
of its latest montary policy meeting at 1145 GMT. The bank is
expected to hold rates at record lows, after which ECB chief
Jean-Claude Trichet will hold a news conference at 1230 GMT.
The bank will be under pressure to show it can stop the
Greek debt crisis from engulfing other euro zone member states,
with investors keen for signs it has further ammunition up its
sleeve. []
Other commodities were also battered by fears over euro zone
contagion risks, with oil sliding to a six-week low below $80 a
barrel and copper down some 2 percent at its low. [] []
The more industrial precious metals, silver, platinum and
palladium, steadied on Thursday after selling off with most
other commodities on Wednesday as risk aversion soared.
Platinum <XPT=> bounced back to $1,667.50 an ounce from
$1,625, up nearly 3 percent as it recovers from its lowest since
late March, while palladium <XPD=> was at $505.50 against
$501.50. Silver <XAG=> was at $17.49 an ounce against $17.43.
"Both (platinum and palladium) will remain vulnerable to
selling pressure short-term as investors continue to reduce
their risk exposure," said James Moore, an analyst at
TheBullionDesk.com, in a note.
"However the improving fundamental picture should limit the
impact of the pressure, with both maintaining their long-term
up-trends," he added.
(Reporting by Jan Harvey; Editing by Amanda Cooper)
