* S&P cuts outlook on United States to negative
* Investors fret over prospect of Greek debt restructuring
* Coming up: U.S. March housing starts on Tuesday
(Recasts, updates prices, market activity; adds second byline,
dateline, previously LONDON)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, April 18 (Reuters) - Gold prices rallied
toward record highs near $1,500 an ounce on Monday after
Standard & Poor's downgraded its credit outlook for the United
States and as investors worried about debt in the euro zone and
inflation in China.
S&P said it might cut its long-term rating on the United
States within two years, prompting investors to buy gold as a
hedge against economic uncertainty. The ratings agency cited a
risk that policymakers may not reach agreement on a plan to
slash the huge federal budget deficit. []
"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," Kilduff said.
Spot gold <XAU=> rose as high as $1,497.20 an ounce and was
later up 0.5 percent at $1,491.67 an ounce by 11:14 a.m. EDT
(1514 GMT).
U.S. gold futures for June delivery <GCM1> rose $6.60 an
ounce to $1,492.60, with volume already topping a busy 150,000
lots, preliminary Reuters data showed.
Gold rose as the Reuters/Jefferies CRB index <.CRB> fell
more than 1 percent, led by a near 3 percent drop in U.S. crude
futures. Global equity markets <.MIWD00000PUS> also tumbled 2
percent.
Dennis Gartman, publisher of the Gartman Letter, said gold
should keep going higher unless losses on equities or other
assets prompt investors to sell the precious metal to meet
margin calls.
Gold also gained support from talk that Greece may be
forced to restructure its debt and on uncertainty over a
bailout for Portugal.
"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."
CHINA MOVE STOKES INFLATION
Gold also got a boost from concerns about inflation in
emerging markets. China raised banks' required reserves on
Sunday for the fourth time this year, extending the fight
against stubbornly high inflation. []
"It certainly looks as though there are signs that
inflation is uncomfortably high within the Asia region," said
RBS analyst Daniel Major. "Gold has a role as a perceived
inflation hedge."
Among other precious metals, silver <XAG=> fell 0.8 percent
to $42.64 an ounce, bouncing off a 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.
Platinum <XPT=> eased 0.4 percent at $1,775 an ounce, while
palladium <XPD=> dropped 3.2 percent to $736.50.
Prices at 11:14 a.m. EDT (1514 GMT)
LAST NET PCT YTD
CHG CHG CHG
US gold <GCM1> 1492.60 6.60 0.4% 5.0%
US silver <SIK1> 42.660 0.089 0.2% 37.9%
US platinum <PLN1> 1782.30 -12.50 -0.7% 0.2%
US palladium <PAM1> 739.00 -29.10 -3.8% -8.0%
Gold <XAU=> 1491.67 7.92 0.5% 5.1%
Silver <XAG=> 42.64 -0.35 -0.8% 38.2%
Platinum <XPT=> 1775.00 -7.70 -0.4% 0.4%
Palladium <XPD=> 736.50 -24.05 -3.2% -7.9%
Gold Fix <XAUFIX=> 1493.00 8.50 0.6% 5.9%
Silver Fix <XAGFIX=> 42.79 18.00 0.4% 39.7%
Platinum Fix <XPTFIX=> 1778.00 8.00 0.4% 2.7%
Palladium Fix <XPDFIX=> 749.00 13.00 1.7% -5.3%
(Additional reporting by Wanfeng Zhou in New York)
