* S&P cuts outlook on United States to negative
* Investors fret over prospect of Greek debt restructuring
* China reserve requirement hike puts inflation in spotlight
(Updates prices, adds comment)
By Jan Harvey
LONDON, April 18 (Reuters) - Gold prices rallied to record
highs near $1,500 an ounce on Monday after rating agency
Standard & Poor's cut its outlook for the United States to
negative from stable, boosting safe-haven flows into the metal.
S&P cited a "material risk" that policymakers may not agree
on a plan to trim the U.S. budget deficit. []
Spot gold <XAU=> rose as high as $1,497.20 an ounce and was
bid at $1,492.25 an ounce at 1358 GMT, against $1,483.75 late in
New York on Friday. U.S. gold futures for June delivery <GCv1>
rose $7.60 an ounce to $1,493.60, off a record $1,498.60.
The cut rattled the dollar, which pared its earlier hefty
gains versus the euro, while U.S. Treasury debt turned negative.
[] []
The news added to upward pressure on gold, which had already
hit record highs in Asian trade. The metal later retreated as
increased talk that Greece would be forced to restructure its
debt and uncertainty over a bailout for Portugal hurt the euro.
Consequent gains in the dollar put the brakes on gold's
rise, though flows into the metal as a result of the crisis
limited losses.
"The debt crisis in the euro zone is capping the euro but is
also an argument (to buy) gold as a safe haven," said Peter
Fertig, a consultant at Quantitative Commodity Research.
"If the debt crisis should calm down, interest rate spreads
argue for a stronger euro, which would also be a positive factor
for gold. From that perspective, gold appears to be well
supported."
Other assets also slipped after the S&P cut in ratings
outlook, with stock markets tumbling in Europe and the United
States, oil extending losses and industrial metals such as
copper falling. [] [] [] [] []
"The U.S. debt situation got a reality check this morning
from the move by S&P," said John Kilduff, a partner at Again
Capital in New York.
"Only precious metals will be seen as attractive in the
aftermath of the outlook downgrade. The overall economic outlook
becomes more opaque with this; equities and energies will be
very much under pressure now."
INFLATION FEARS
Crude oil remained near multi-year highs, however, supported
by unrest in the Middle East and North Africa. Elevated oil
prices tend to support gold, which is often seen as a hedge
against oil-led inflation.
"Gold prices are more sensitive to commodity price movements
than to broader inflation," said HSBC analyst James Steel in a
note. "The recent gains in inflation across the OECD and
emerging world are in those categories -- food and fuel -- that
gold is most likely to react positively to."
Gold also benefited in earlier trade from fresh concerns
over inflation in emerging markets. China raised banks' required
reserves on Sunday for the fourth time this year, extending the
fight against stubbornly high inflation. []
"(There was) another increase in the Chinese reserve
requirement ratio over the weekend," said RBS analyst Daniel
Major. "It certainly looks as though there are signs that
inflation is uncomfortably high within the Asia region. Gold has
a role as a perceived inflation hedge."
Among other precious metals, silver <XAG=> was bid at $43.11
an ounce against $42.99, having earlier touched a new 31-year
high at $43.51 an ounce. Silver has been the best-performing
precious metal so far this year, up 40 percent since January.
However, analysts say the metal, which has benefited from
strong investment flows and perceptions that recovering
industrial demand will put a floor in prices, may be overpriced
at current levels.
Platinum <XPT=> was at $1,782.49 an ounce against $1,782.70,
while palladium <XPD=> was at $744.22 against $760.55.
(Reporting by Jan Harvey; Editing by Jane Baird)
