* Concern over contagion hits euro, boosts safety plays
* Bullion biggest gains since Feb 2009, equities plunge
* Gold holds gains even after stocks recover from rout
* SPDR gold ETF holdings hit record 1,166 T
* Coming up: U.S. April nonfarm payrolls on Friday
(Recasts, updates prices, market activity)
By Frank Tang
NEW YORK, May 6 (Reuters) - Gold prices vaulted 3 percent
on Thursday to near an all-time high, topping $1,200 an ounce
in the biggest one-day gain in more than a year as financial
turmoil in Europe and tumultuous U.S. equity trade accelerated
the flight to safety.
After trading higher through most of the day, gold prices
rallied sharply at mid-afternoon, passing the $1,200 mark for
the first time since Dec. 4 as stocks plunged on what sources
said was an erroneous trade at a Wall Street bank.
While major stock indices recouped much of their sudden
losses after falling as much as 9 percent, gold clung to its
over $30-an-ounce gains, underscoring the ongoing skittishness
of investors and the desire for safer asset amid mounting
worries about euro zone contagion from Greece's debt problems.
"Gold is yet another currency ... but it does not have the
debt issue. It's not just a Greek problem, not just a European
problem, but a global problem," said Axel Merk, president of
California-based Merk Mutual Funds, which has $550 million fund
assets.
"Gold is one way that investors can try to diversify in a
world where there are no risk-free assets anymore."
Spot gold <XAU=> rose as high as $1,210.35 an ounce, its
firmest since Dec. 4 and its fourth rise in the last five
trading sessions. Gold hit a record high of $1,226.10 last
December.
It was at $1,208.55 an ounce at 3:30 p.m. EDT (1930 GMT),
up 2.9 percent from $1,174.20 late in New York on Wednesday,
its biggest rise since February last year.
U.S. gold futures for June delivery <GCM0> on the COMEX
division of the NYMEX were up nearly $37, or 3.1 percent, to
$1,211.90 an ounce. Earlier, June settled at $1,197.30 an
ounce.
Gold priced in euros <XAUEUR=R>, in Swiss francs <XAUCHF=R>
and in sterling <XAUGBP=R> all hit record highs, underlying the
metal's strength with rising currency volatility. Meanwhile,
strong investment interest boosted holdings of the biggest
gold-backed exchange-traded fund to an all-time peak.
Gold prices tend to rise in times of economic and
geopolitical crises.
"Despite the ECB being confident that default for Greece is
'out of question', the market seems to be nervous," said
Pradeep Unni, senior analyst at Richcomm Global Services.
"At this point in time, it is becoming evident that
investors are hedging the recent euro zone and UK crisis
equally in gold and the U.S. dollar," he said.
Waning confidence in euro-zone sovereign debt markets and
currencies has boosted gold, traders said.
The premium investors demand to hold 10-year euro zone
peripheral government bonds rather than benchmark Bunds rose
after Trichet said buying bonds to combat the credit crisis had
not been discussed at a rate-setting meeting. []
Escalating concerns that Greece's debt crisis may spill
over into other euro zone states knocked the euro down 2
percent to under $1.26 on Thursday. []
Dollar strength usually weighs on gold, but this factor is,
for the moment, being outweighed by risk-related buying.
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For a graphic showing gold's correlation with the euro,
click on: http://link.reuters.com/tab92k
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Euro-priced gold <XAUEUR=R> hit a record high of 962.20
euros an ounce, while in Swiss francs <XAUCHF=R> and sterling
<XAUGBP=R> the metal also peaked at a record at 1,348.33 francs
an ounce and 820.37 pounds an ounce respectively.
RISK APPETITE GROWS
Euro zone states are finalizing details of a 110 billion
euro aid package for Greece, which is struggling to implement
austerity measures attached to the aid.
Despite gold's rally, Morgan Stanley said in a note, "We
see further upside from current levels."
Investment demand for bullion has been strong, with the
world's largest gold-backed exchange-traded fund, New York's
SPDR Gold Trust <GLD>, reporting a rise of 7 tonnes in its
holdings to a record 1,166.002 tonnes on Wednesday. []
The more industrial precious metals -- silver, platinum and
palladium -- rebounded on Thursday after selling off with most
other commodities on Wednesday as risk aversion soared.
Platinum <XPT=> was at $1,634.50 an ounce, having earlier
climbed 3 percent to $1,682 an ounce against $1,625 on
Wednesday.
Meanwhile palladium <XPD=> was at $498 against $501.50 and
silver <XAG=> was at $17.39 an ounce versus $17.43.
Close Change Pct 2009 YTD
Chg Close % Chg
US gold <GCM0> 1197.30 22.3 1.9 1096.20 9.2
US silver <SIN0> 17.515 -0.019 -0.1 16.845 4.0
US platinum <PLN0> 1666.50 16.90 1.0 1471.00 13.3
US palladium <PAM0> 514.10 5.55 1.1 408.85 25.7
Prices at 3:25 p.m. EDT (1925 GMT)
Gold <XAU=> 1202.25 28.05 2.4 1096.35 9.7
Silver <XAG=> 17.43 0.00 0.0 16.84 3.5
Platinum <XPT=> 1634.50 9.50 0.6 1465.50 11.5
Palladium <XPD=> 498.00 -3.500 -0.7 405.50 22.8
Gold Fix <XAUFIX=> 1185.25 7.25 0.6 1104 7.4
Silver Fix <XAGFIX=> 17.69 6.00 0.3 16.99 4.1
Platinum Fix <XPTFIX=> 1662.00 4.00 0.2 1466 13.4
Palladium Fix<XPDFIX=> 507.00 0.00 0.0 402 26.1
(Additional reporting by Jan Harvey in London; Editing by Lisa
Shumaker)
