* S&P cuts outlook on United States to negative
* Investors fret over prospect of Greek debt restructuring
* Gold defies dollar strength; euro tumbles on debt worry
* Coming up: U.S. March housing starts on Tuesday
(Recasts, updates prices, market activity; adds links to
graphic; new dateline, previously NEW YORK/LONDON)
By Frank Tang
NEW YORK, April 18 (Reuters) - Gold prices rallied to a
record high $1,497.20 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 0.8 percent at $1,495.60 an ounce by
2:00 p.m. EDT (1800 GMT), set for a gain for the fourth
consecutive session.
U.S. gold futures for June delivery <GCM1> rose $10.60 an
ounce to $1,496.60, with volume already topping a busy 190,000
lots, preliminary Reuters data showed.
Gold rose as the Reuters/Jefferies CRB index <.CRB> fell 1
percent, led by a more than 2 percent drop in U.S. crude
futures. Global equity markets <.MIWD00000PUS> also tumbled.
(Gold-oil chart graphic: http://link.reuters.com/tat98r )
Gold gained support from talk that Greece may be forced to
restructure its debt and on uncertainty over a bailout for
Portugal. []
"There is ongoing concern that the (European) debt problems
haven't been fixed. The negative outlook just undermines the
role of the dollar as a safe-haven currency," said Leo Larkin,
metals equity analyst of Standard & Poor's.
Larkin, whose work is separate from that of S&P's sovereign
rating unit, said he expects gold to hit a record $1,600 an
ounce by year-end on inflation worries and low real interest
rates.
The dollar remained broadly higher as mounting concerns
about Greece's fiscal conditions more than offset S&P's
downgrade of U.S. outlook. []
Gold remained far below its all-time inflation-adjusted
high, estimated at almost $2,500 an ounce, set in 1980, an era
of Cold War tension, oil shocks and hyperinflation. (Graphic:
http://r.reuters.com/ren88r )
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=> gained 0.3
percent to $43.12 an ounce, having earlier hit 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 0.3 percent at $1,777.99 an ounce,
while palladium <XPD=> dropped 3.3 percent to $735.22.
Prices at 2:00 p.m. EDT (1800 GMT)
LAST NET PCT YTD
CHG CHG CHG
US gold <GCM1> 1496.60 10.60 0.7% 5.3%
US silver <SIK1> 43.135 0.559 1.3% 39.4%
US platinum <PLN1> 1784.30 -10.50 -0.6% 0.3%
US palladium <PAM1> 737.85 -30.25 -3.9% -8.1%
Gold <XAU=> 1495.60 11.85 0.8% 5.4%
Silver <XAG=> 43.12 0.13 0.3% 39.7%
Platinum <XPT=> 1777.99 -4.71 -0.3% 0.6%
Palladium <XPD=> 735.22 -25.33 -3.3% -8.0%
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 and Jan
Harvey in London; Editing by David Gregorio)
