* Jitters over euro zone debt continue to underpin gold
* SPDR gold ETF holdings surge by most since Feb. 2009
* Sterling-priced gold hits record, UK hung parliament eyed
(Updates prices)
By Jan Harvey
LONDON, May 7 (Reuters) - Gold eased to near $1,200 an ounce
in Europe on Friday as the metal succumbed to pressure from the
dollar's recent gains, but underlying safe-haven demand linked
to euro zone debt problems is still firmly underpinning prices.
Spot gold <XAU=> was bid at $1,201.05 an ounce at 1349 GMT
against $1,207.25 late in New York on Thursday.
"The markets' increasing concerns about the risk of
contagion of the Greek crisis to other euro zone countries is
weighing on EUR/USD," said BNP Paribas analyst Anne-Laure
Tremblay.
"This is likely driving gold lower today, along with profit
taking. Going forward, a strengthening dollar should be
counterbalanced by safe haven demand for gold, stemming from the
current debt issues affecting the euro zone."
U.S. gold futures for June delivery <GCM0> on the COMEX
division of the New York Mercantile Exchange rose $2.60 to
$1,199.90 an ounce.
The euro <EUR=> continued to languish on Friday after
hitting 14-month lows against the dollar in the previous session
as investors shed riskier assets.
The dollar rose versus a basket of currencies <.DXY> and
U.S. stock futures held gains after data showed the U.S. economy
added a bigger-than-expected 290,000 jobs in April, raising
hopes the labour market recovery may be picking up steam. []
Gold fluctuated after the data, but has since steadied just
below $1,200 an ounce. The metal has risen almost 2 percent this
week as investors sought a haven from euro zone debt risks,
climbing as high as $1,210.35 an ounce on Thursday.
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."
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.
"Buying has been evident all week, but demand yesterday was
the greatest that we have experienced since 2008," she said.
"Current gold demand reflects... extreme risk aversion."
Holdings of the world's largest gold exchange-traded fund,
the SPDR Gold Trust <GLD>, jumped nearly 20 tonnes -- its
biggest one-day volume rise since Feb. 2009 -- to a record
1,185.787 tonnes on Thursday. []
Meanwhile an inconclusive outcome to the bitterly fought UK
election on Friday lifted sterling gold <XAUGBP=R> to a record
828.60 pounds an ounce. []
"People will typically buy gold because they don't want to
be in other things," said Adrian Ash, head of research at gold
dealer the Bullion Vault. "Right now, for sterling investors,
there aren't many other places which look like being a sound and
stable store of wealth for the near term."
Among other precious metals, platinum <XPT=> continued its
recovery from Wednesday's one-month low, rising to $1,650.50 an
ounce from $1,625. Palladium <XPD=> was at $499 versus $502.50,
and silver <XAG=> at $17.68 an ounce against $17.61.
(Editing by Michael Hogan)
