* Concerns still linger over euro zone sovereign debt issues
* Gold ETF holdings remain near record highs
* Palladium climbs more than 4 pct after last week's slide
(Updates, adds comment, changes dateline from TOKYO)
By Jan Harvey
LONDON, May 24 (Reuters) - Gold rose 1.2 percent to near
$1,190 an ounce in Europe on Monday, recovering some of last
week's losses, as lingering concerns over euro zone sovereign
debt levels supported the metal as a safe store of value.
Fears over a potential default by debt-laden Greece, which
took gold to record highs earlier this month, have receded since
the International Monetary Fund and euro zone countries unveiled
a multi-billion euro aid package, but tensions remain high.
Holdings of the world's largest gold exchange-traded fund,
New York's SPDR Gold Trust <GLD>, are still at record levels
despite last week's price correction, fuelling expectations
investors are buying the metal as a long-term haven from risk.
Spot gold <XAU=> was bid at $1,189.15 an ounce at 0813 GMT,
against $1,175.15 late in New York on Friday. U.S. gold futures
for June delivery <GCM0> on the COMEX division of the New York
Mercantile Exchange rose $13.40 to $1,189.50 an ounce.
"The nervousness of currency markets is clearly visible in
the gold market," said Pradeep Unni, senior analyst at Richcomm
Global Services in Dubai. "The extreme fear of potential
unannounced ECB intervention or a fresh development in the euro
bloc is keeping investors on the edge."
The euro <EUR=> fell 0.5 percent against the dollar on
Monday as the single currency's short-covering rally of last
week ran out of steam, with investors continuing to cut risk in
their portfolios. []
A stronger dollar usually weighs on gold, but the
traditional strong inverse link between the two assets has
weakened as both are benefitting from risk aversion. In the
longer term, this link may well be re-established, Unni said.
"Now more than ever, arguments of the dollar and gold
decoupling from (their) inverse correlation are emerging and
this is because investors are hedging recent euro zone and UK
crises equally in gold and US dollar," he said.
"The key point is that gold never actually decouples from
the U.S. currency on a longer time duration."
Equity markets bounced after last week's heavy selling, with
European shares opening higher after Asian stocks recouped
ground from last week's eight-month lows. []
Other commodities like crude oil and copper also lifted from
last week's lows, with oil prices rising more than 1 percent in
early trade. [] []
ETF HOLDINGS NEAR RECORD
While investment demand for gold as a precious metal has
been strong so far this year, with ETF holdings near record
levels, high prices have hurt jewellery demand.
Italian precious metal jewellery imports are thought to have
declined 5 percent year on year in volume terms in the first two
months of 2010, though they have risen 9 percent in the same
period in value, the president of the Fiera di Vicenza jewellery
trade show said on Saturday. []
Italy is historically Europe's biggest exporter of gold and
silver jewellery. []
Other precious metals also recovered after last week's hefty
falls. Palladium, which tumbled as much as 25 percent last week
from the previous Friday's close to its lowest level since early
February, climbed 4.5 percent in early trade.
Palladium <XPD=> was at $447 against $433.50, off a high of
$453, while platinum <XPT=> was at $1,522 against $1,504.50.
"Both metals remain supported this morning and will (be)
looking to base-build having broken long-term trend-line support
established since late 2008," said James Moore, an analyst at
TheBullionDesk.com.
"The fact ETF holdings are steady, is encouraging with
current levels potentially looking very attractive to
longer-term investors given the improving fundamental outlook."
Silver <XAG=> was bid at $17.95 an ounce against $17.59.
(Reporting by Jan Harvey; Editing by Amanda Cooper)
