* Moody's downgrade of Greece lifts risk aversion
* SPDR gold ETF holdings stay at record above 1,306 T
* Gold-silver ratio drops to two-week low
(Updates prices)
By Jan Harvey
LONDON, June 15 (Reuters) - Gold rallied on Tuesday after a
ratings downgrade of Greece reignited fears of a worsening
fiscal crisis and lifted interest in the metal as a shield
against instability in the wider markets.
Spot gold <XAU=> was bid at $1,226.95 an ounce at 1450 GMT,
against $1,220.15 late in New York on Monday. U.S. gold futures
for August delivery <GCQ0> were up nearly $5 at $1,229.10.
Analysts said the Moody's downgrade of Greek government debt
ratings to junk was not unexpected, but it reminded investors
Europe's debt crisis is not over. In the medium term, concerns
over fiscal stability are likely to fuel further gains in the
metal.
"We have got a lot of potential market disruption risk this
year -- sovereign risk from Europe, fiscal tightening, at some
point monetary tightening, and regulatory risk as well," said
Michael Lewis, head of commodity research at Deutsche Bank.
"There are a number of external events that could be quite
positive for gold." But he added that he expected the pace of
gains to slow from the rate seen from the end of April.
On the wider markets, European and U.S. shares moved higher,
boosted by strong demand for Irish and Spanish government debt
and U.S. data showing inflation remained under control. []
[]
The euro <EUR=> rose further versus the U.S. dollar to trade
above $1.23 on Tuesday after solid demand at the debt auctions
soothed some worries about euro zone debt problems. []
A stronger euro, and consequently weaker dollar, typically
benefits gold, although the relationship has weakened this year
as sovereign risk issues in the euro zone knocked the single
currency while lifting bullion's appeal as a haven.
Physical demand for gold firmed a touch in Asia as prices
slipped from record highs. Sales of scrap in the world's number
one consumer, India, subsided although domestic prices were
within sight of record levels. []
FIRM DEMAND
Firm demand for physical bullion from investors also kept
holdings of the world's largest gold-backed exchange-traded
fund, New York's SPDR Gold Trust <GLD>, at record highs above
1,306 tonnes on Monday.
From a technical perspective, the outlook for the precious
metal is positive, said analysts who study charts of past price
movements to determine the future direction of trade.
"The metal spent the last three days consolidating between
$1,215 and $1,238, and probability now lies with the bullish
trend for another attempt on its record high," said
ScotiaMocatta in a note.
Silver <XAG=> rose by more than 1 percent to $18.40 an ounce
against $18.16.
The ratio of gold to silver -- how many ounces of silver are
needed to buy an ounce of gold -- fell to a two-week low on
Tuesday near 66:1, showing the metal is becoming increasingly
expensive compared with gold.
Platinum <XPT=> was at $1,555.75 an ounce against $1,557,
and palladium <XPD=> was at $459.73.
Morgan Stanley upgraded the U.S. auto industry to
"attractive" from "in-line" and said it sees higher levels of
sustainable profitability for the sector, driven by
restructuring, capacity rationalization and higher utilisation.
[]
The platinum group metals, which are primarily used in
catalytic converters, are particularly sensitive to developments
in the automotive sector.
(Editing by Jane Baird)
