* Gold extends gains above $1,200, PGMs down
* ETF flows up as world equities sag
* Coming Up: U.S. Initial jobless claims Weekly; 1230 GMT
(Updates prices)
By Amanda Cooper
LONDON, Aug 12 (Reuters) - Gold prices headed towards
session highs on Thursday, as flagging confidence in the global
economic outlook battered stock markets and prompted a flurry of
investment in perceived safe-haven assets.
Global equities <.MIW0000PUS> fell and the dollar index
<.DXY> rallied, having racked up its largest daily gain in two
years on Wednesday after a raft of economic data suggested
global growth was beginning to plateau.
Platinum and palladium fell by more than 2 percent as
concern deepened over waning industrial demand, particularly
from the auto sector.
Gold <XAU=> was bid at $1,205.40 an ounce by 1120 GMT,
against $1,197.00 late in New York on Wednesday, just above its
100-day moving average at $1,191.30, but still over 5 percent
below late June's lifetime high around $1,264.
Gold for December delivery on COMEX <GCZ0> was up $8.4 at
$1,207.70 an ounce.
An aggressive sell-off in the wider commodity markets could
spell another bout of weakness for gold as investors cash in on
their bullion holdings to cover losses elsewhere.
"It all points to a picture of a recovery that is grinding
to a slow halt here and that will have an impact," said Ole
Hansen, senior manager at Saxo Bank.
"If we see losses in some of these other commodity markets
it is going to be tricky for gold to make headway but at the
same time it seems to be well supported here," he said.
Traders in London also pointed to a research note from
Goldman Sachs, which upgraded its forecast for the gold price,
as a driver to the rally in the price on Thursday.
"The recent sell-off has left speculative long positions in
gold oversold relative to US real interest rates, which we
believe has set the stage for a rally to our 6-month gold price
target of $1,300/oz," the bank said.
INVESTORS SEEK GOLD
Although demand from key Asian consumers has been suppressed
by the rise in gold prices over the last week or so, the desire
for a safe haven as financial market volatility increases has
translated into a rise in investment demand. []
The world's largest gold-backed exchange-traded fund, SPDR
Gold Trust <GLD.P>, said its holdings rose for the first time in
a week. []
Silver <XAG=> benefited from a safe-haven bid, edging up to
$17.94 an ounce from $17.84 the day before.
"I would expect the equity markets to continue to sell off.
We may see more gold selling as we've often seen before to cover
those margin calls," said Darren Heathcote, head of trading at
Investec Australia in Sydney.
"It's being pulled both ways, in terms of selling for margin
calls, but on the other hand safe-haven investors will be
attracted to gold."
Fear of a global slowdown has hit Japan's Nikkei <>
particularly hard, as the index fell to a 13-month low on
Thursday, which in turn undermined industrial commodities such
as platinum and crude oil <CLc1>.
The euro <EUR=> pared gains and fell against the dollar
after Greek data reinforced concern about the weaker euro zone
economies, while the yen pared losses versus the dollar as fears
eased about immediate intervention by the Bank of Japan. []
Asian traders said earlier the drop in PGM prices was a
knee-jerk reaction to declines in Asian stocks. []
Spot platinum <XPT=> was last at $1,512.50 an ounce, down
around 2.2 percent from levels seen late in New York on
Wednesday, while palladium <XPD=> was off by about 2 percent, at
$461.00 versus $477.00, having earlier hit a low of $461.75.
"I think we are just reacting to the drop in stock markets,
but there has been some physical buying from jewellers because
of cheaper prices," said one Hong Kong platinum dealer.
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For a graphic of the correlation of spot platinum to the
Nikkei, click on this link:
http://graphics.thomsonreuters.com/gfx/AC_20101208100008.jpg
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(Additional reporting by Lewa Pardomuan in Singapore; editing
by Sue Thomas)
