* Bullion prices hit highest since July 22
* Gold hits record in many currencies including euro
* Russian central bank says plans to continue buying gold
(Updates prices)
By Jan Harvey
LONDON, Feb 17 (Reuters) - Gold hit seven-month highs on
Tuesday as risk-averse investors bought into the precious metal
as a safe store of value away from the turmoil in financial
markets.
The precious metal rallied to new highs in a raft of
currencies, including the euro, sterling, the South African
rand, the Indian rupee and the Canadian and Australian dollars.
Spot gold <XAU=> rose to $965.80/967.80 an ounce at 1400 GMT
from $940.90 in New York late on Monday. Earlier it touched a
high of $967.40 an ounce, its firmest since July 22.
U.S. gold futures for April delivery <GCJ9> on the COMEX
division of the New York Mercantile Exchange rose $25.00 to
$966.50 an ounce, having earlier touched a high of $966.60.
Fears about a deepening recession increased as U.S. stock
index futures fell after a bleak report on New York
manufacturing. []
"Physical demand is still very low, but safe-haven buying is
more than absorbing that for the time being," Commerzbank senior
trader Michael Kempinski said.
Credit rating agency Moody's said on Tuesday the recession
in eastern Europe is likely to be more severe than elsewhere and
would put financial strength ratings of local banks and their
Western parents under pressure. []
Fears over the global economic outlook and worries that
governments' attempts to kick-start their economies may cause
high inflation are fuelling investment in gold.
News that the Russian central bank planned to buy more gold
in 2009 also boosted interest in the metal, Kempinski said.
"The Russian bank said it had bought gold and planned to buy
more, which pushed the price up," he said.
"This, in combination with the ETFs coming in on the buy
side in a very thin market, was enough to push gold higher."
RUSSIA
Alexei Ulyukayev, deputy chairman of Russia's central bank,
told Reuters the bank had increased gold's share of its
reserves, and planned to continue doing so this year. "We are
buying gold," he said. []
UBS strategist John Reade said he expected the bank would
make purchases from domestic producers.
"We expect slow and steady accumulation from the CBR in
coming years and do not expect Russia to start buying gold in
the international OTC market," he said.
While investment in products like gold-backed exchange
traded funds has soared as investors seek a safe place for their
cash, high prices are hurting jewellery demand in key centres of
gold buying, India, China and the Middle East.
Buyers in India, usually the world's leading market for
gold, ignored the wedding season and postponed purchases as they
grappled with high prices, traders said. The flow of scrap
supply gained momentum. []
"Nobody is interested in buying," Daman Prakash, director of
Chennai-based wholesaler MNC Bullion, said.
The benchmark April gold contract <MAUJ9> traded in India
peaked at 15,379 rupees per 10 grams, boosted by safe haven
buying and a weak rupee.
Gold shrugged off moves in its usual external drivers, crude
oil and the dollar. The dollar, which normally moves in the
opposite direction to gold, rose to ten-week highs versus the
euro, also benefiting from rising risk aversion. []
Oil prices fell more than 5 percent as bleak economic
indicators in Asia turned attention back to the demand slump.
[]
Among other precious metals, spot silver <XAG=> climbed to
$13.94/14.00 an ounce from $13.57.
Spot platinum <XPT=> edged up to $1,082/1,092 an ounce from
$1,063. The fundamentals for the metal remain weak, with demand
from carmakers -- the major users of the platinum group metals
-- severely hit by the recession in the United States.
"Gold movements are likely to continue to push platinum for
the time being," said Fairfax analyst Marc Elliott in a note.
Spot palladium <XPD=> hit a three-month high of $218.50 an
ounce, before easing back to $215/220 an ounce from $213.50.
The metal has been supported by buying for palladium-backed
ETFs, on the perception the metal is cheap compared to its
peers.
(Editing by Sue Thomas)
