* World Gold Council says 2008 gold demand rises 4 pct
* SPDR Gold Trust breaks 1,000 tonne mark
* Records set in sterling, rand, Canadian/Australian dollars
(Updates throughout, changes dateline - pvs TOKYO)
By Jan Harvey
LONDON, Feb 18 (Reuters) - Gold firmed to a fresh seven
month high in Europe on Wednesday as investors spooked by the
outlook for the financial system bought gold and bullion-backed
exchange-traded funds as a safe store of value.
Holdings of the world's largest gold-backed ETF, the SPDR
Gold Trust, leapt to a record high above 1,000 tonnes on Tuesday
as fears of a deepening global recession and the prospect of
inflation fuelled buying.
Spot gold <XAU=> hit a high of $973.50, its strongest since
July 22, and was quoted at $967.35/968.95 an ounce at 1031 GMT,
little changed from $968.35 late in New York on Tuesday.
The precious metal also hit new highs in sterling, South
African rand and Canadian and Australian dollar terms.
"We believe this is purely a flight to safety, with people
desperate to put their money somewhere they can get liquidity
and get their money back," said Standard Chartered analyst
Daniel Smith.
Deepening economic gloom and fears about the global
financial sector pushed Asian shares to their lowest level in a
month overnight, while European equities failed to hold onto
early gains. []
Risk aversion had flared earlier in the week after Moody's
threatened to downgrade banks with exposure to the weakening
central and eastern European economies, and Standard and Poor's
said it may review emerging Europe bank ratings. []
A World Gold Council report released on Wednesday showed
physical gold demand rose sharply in the second half of 2008.
Identifiable investment demand for gold, which includes ETFs,
bars and coins, was up 64 percent in 2008 over the year before.
World Gold Council investment research manager Rozanna
Wozniak said fear was behind the rise in investment.
"People are worried about their assets, worried about their
savings, and scared about the banking system, and they are
looking for protection," she told Reuters.
"Further out, there is still the prospect of inflation,
particularly given that many governments are having to fund very
large fiscal deficits."
Total demand for gold ETFs doubled in the second half of
2008 from the first to 244.7 tonnes, it said. []
In contrast, holdings of the SDPR Gold Trust have surged by
more than 228 tonnes in 2009 to date alone. The trust's reserves
now stand at 1,008.8 tonnes, as of Feb.17. []
FIRM
The main external drivers of gold, oil and the dollar, lent
little support to the precious metal. The dollar firmed a touch
versus the euro, rebounding from earlier losses. []
A stronger dollar typically weighs on gold, which is often
bought as a hedge against weakness in the U.S. currency.
However, both are currently being lifted by risk aversion.
Oil, which often pulls gold in its wake, softened meanwhile
to below $35 a barrel, extending the previous session's near-7
percent losses, on fresh concerns over the economy.
Among other precious metals, silver climbed to a six-month
high of $14.31 an ounce, tracking gains in gold. The metal is
also being lifted by flight-to-safety buying and interest in
silver-backed ETFs.
"Silver is benefiting from the same sort of safe haven demand
as gold, but with its higher proportion of industrial demand,
the metal has less price elastic demand sitting below the
market," said UBS strategist John Reade in a note.
"Like platinum, we doubt that strong fundamental demand will
support the metal during corrections, and investors should be
aware that silver can collapse when gold corrects."
Spot silver <XAG=> strengthened to $14.13/14.19 an ounce
from $14.10.
Platinum meanwhile climbed to a 4-1/2 month high of
$1,109.50, also boosted by gains in gold, with dealers and
analysts reporting lower prices have boosted jewellery demand.
Spot platinum <XPT=> firmed to $1,103.50/1,113.50 an ounce
from $1,088, while spot palladium <XPD=> rose to $217.50/222.50
an ounce from $216.50.
(Reporting by Jan Harvey; Editing by Keiron Henderson)
