Thursday, May 06, 2010


   By Matthew Walls 
   Of DOW JONES NEWSWIRES

LONDON (Dow Jones)--Spot gold is grinding higher Thursday in Europe, fighting off pressure from the dollar's strength against the euro on sustained safe haven demand.

The euro slid to a 14-month low against the dollar as fears of sovereign debt contagion in the euro zone failed to ease.

The uncertain outlook is driving investors toward safe havens and hard assets such as gold.

Gold in euro terms is making record highs, while in dollar-terms is just under 5% below December's record high of $1,226.30 a troy ounce.

At 0949 GMT, spot gold was 0.24% higher on the day at $1,178.12 a troy ounce. The metal is struggling to breach resistance at $1,180/oz.

"The sovereign debt risk is so high," said Standard Bank precious metals analyst Walter de Wet. "With gold having no credit risk, that's the asset you want to hold."

Investors in gold exchange-traded funds are responding to the crisis by stocking up on gold bullion. Holdings in the world's largest gold ETF rose seven metric tons Wednesday to 1,666 tons. A customary two-day delay in reporting means the purchases were made at the start of the week.

Analysts were divided on whether gold can continue to shrug off the stronger dollar as it has in recent weeks.

"It certainly can't help gold if the dollar continues to strengthen," said de Wet.

With gold also having to contend with rising scrap gold sales, the metal's unlikely to make much headway, he said.

"Up until tomorrow our view is that gold will continue to find support, but we still think there will be selling into rallies above $1,180/oz."

But Swedish bank SEB said it expects gold to continue to ignore the dollar, though it cautioned that if the European Union acts to calm markets it may retreat before bouncing back.

"[Risk]-adverse, safe haven buyers are likely to see weakness in the gold market as a buying opportunity."

In other metals, spot silver was 0.3% higher at $17.50/oz at 0949 GMT. Spot platinum was up 1% at $1,667/oz and spot palladium was 0.7% higher at $509/oz.

-By Matthew Walls, Dow Jones Newswires; +44 (0)20 7842 9412; matthew.walls@dowjones.com

(END) Dow Jones Newswires

May 06, 2010 06:23 ET (10:23 GMT)