* Jitters over euro zone debt continue to underpin market
* SPDR gold ETF holdings surge by most since Feb. 2009
* Sterling-priced gold hits record, UK hung parliament eyed
* Coming up: U.S. non-farm payrolls at 1230 GMT
(Updates prices)
By Jan Harvey
LONDON, May 7 (Reuters) - Gold eased below $1,200 an ounce
in Europe on Friday as investors cashed in some gains after the
previous session's rally to five-month highs, but underlying
safe-haven demand is still firmly underpinning prices.
The metal hit record highs in sterling terms <XAUGBP=R>,
meanwhile, as the prospect of a hung parliament in the United
Kingdom after a bitterly fought general election hurt the pound.
Spot gold <XAU=> was bid at $1,196.50 an ounce at 1136 GMT,
against $1,207.25 late in New York on Thursday.
In that session it rose as high as $1,210.35 an ounce, and
although it has since given up some of those gains, the metal
still has its sights firmly set on December's all-time high of
$1,226.10 an ounce, traders said.
"Certainly a pull-back in this market is more than likely,
but the overall trend for gold is higher," said Peter Hillyard,
head of metals sales at ANZ Bank in London. "Gold's run-up is
related to the various economic themes running through Europe."
"It is a question of people being fearful of what is
happening to the euro and a recognition of the financial mess
that people find themselves in," he said. "That has people
focusing more on what is a reasonably safe haven, and that is
gold."
U.S. gold futures for June delivery <GCM0> on the COMEX
division of the New York Mercantile Exchange rose 20 cents to
$1,197.50 an ounce. Traders are awaiting fresh direction from
U.S. non-farm payrolls data due at 1230 GMT.
The precious metal has risen almost 2 percent this week as
investors sought a haven from the growing risk that serious debt
problems seen in Greece could spread elsewhere in the euro zone
The euro <EUR=> rebounded on Friday, correcting after the
previous session's losses, but is still on track for big falls
this week as concerns that Greece's debt problems would spread
prompt investors to shed riskier assets. []
The flight to quality took German bond yields to record lows
and lifted Bund futures on Friday, while nervous investors sold
peripheral euro zone states' debt. []
PHYSICAL INVESTMENT SOARS
Physical investment demand for gold soared on Thursday,
dealers said. UBS analyst Edel Tully said in a note the bank's
Zurich and Geneva sales desk experienced exceptionally strong
demand for small bars and coins on Thursday.
"All size bars up to 1 kilogramme are wanted by retail
investors. Buying has been evident all week, but demand
yesterday was the greatest that we have experienced since 2008,"
she said. "Current gold demand reflects investor fear and
extreme risk aversion."
Holdings of the world's largest gold exchange-traded fund,
the SPDR Gold Trust <GLD>, soared nearly 20 tonnes -- its
biggest one-day volume rise since Feb. 2009 -- to a record
1,185.787 tonnes on Thursday. []
Jewellery demand was softer, with dealers in major gold
consumer India reporting dwindling demand for a sixth straight
session on Friday as prices traded near their record highs and a
weaker rupee made the metal more expensive. []
An inconclusive outcome to the bitterly fought UK election
on Friday lifted sterling gold to a record 828.60 pounds an
ounce in early trade, while euro-priced bullion <XAUEUR=R> held
near Thursday's record high of 962.20 euros an ounce.
"Denominated in euros, the 1,000 euros a troy ounce mark is
now in reach," said Commerzbank in a note.
Among other precious metals, platinum <XPT=> continued its
strong recovery from Wednesday's one-month low, rising to $1,655
an ounce from $1,625. Palladium <XPD=> was flat at $502.50, and
silver <XAG=> at $17.66 an ounce against $17.61.
(Reporting by Jan Harvey; Editing by William Hardy)
