* Gold hits new 4-month high following Bernanke comments
* Fed chairman warns on systemic risk
* Safe haven buying, weak dollar underpin gold market
(Updates throughout)
By David Sheppard and Jan Harvey
LONDON, July 15 (Reuters) - Gold hit a four-month high on
Tuesday after comments from Federal Reserve Chairman Ben
Bernanke weighed on the dollar and triggered a drop in U.S.
equity markets, fuelling safe-haven buying of the metal.
U.S. stocks slid as much as 2 percent and the dollar wilted
after Bernanke said high oil prices, a weaker housing market and
tighter credit conditions threaten the economy. []
Spot gold <XAU=> hit $987.75 an ounce, the highest since
March 19, before easing to $985.20/986.20 an ounce at 1438 GMT,
against $971.20/972.20 late in New York on Monday.
"The problems on the equity markets, uncertainty, and
general risk aversion are all bullish for gold at the moment,"
said Lehman Brothers analyst Michael Widmer.
Bernanke said U.S. financial markets and institutions remain
under "considerable stress", and added that restoring financial
market stability is a top priority for the Fed.
Turmoil in the markets has benefitted gold, which is often
seen as a safe haven from risk that can be bought as an
alternative investment to more volatile assets such as stocks.
Weakness in the dollar, which struck a record low against
the euro on Tuesday, is also buoying the precious metal. Gold
typically moves in the opposite direction to the dollar, as it
is bought as a currency hedge. []
Gold has risen sharply in other currencies as well as the
U.S. dollar, reinforcing gold's appeal as a safe haven.
In euro terms <XAUEUR=R> it hit a high of 617.92 euros an
ounce after Bernanke's comments, its highest since March 18.
Institutional investment in the precious metal has been
strong as the equity markets wilted.
Gold holdings of the SPDR Gold Trust <GLD.P> <GLD.A>, the
world's largest gold-backed exchange-traded funds, rose to a
record 705.9 tonnes on Friday. While they dipped a touch on
Monday, they remain high at 701.91 tonnes.
In Europe, holdings of ETF Securities' Physical Gold ETF
<PHAU.L> are also at an all-time high.
Among other precious metals, silver <XAG=> rose to
$19.26/19.31 an ounce from $19.12/19.18 late in New York on
Monday. Earlier in the session it reached a new four-month high
of $19.45 an ounce, tracking gold.
Conversely, platinum group metals were weaker. Platinum
<XPT=> eased nearly 2 percent to a session low of $1,977.00 an
ounce, before recovering slightly to trade at $1,983.00/2,003.00
an ounce from $2,012.00/2,032.00.
The metal is suffering from expectations of lower demand
from carmakers as the U.S. economy fades. Platinum is a major
component in autocatalysts.
"(Concern over demand) has been the prevalent theme for a
few weeks now," said Daniel Hynes, an analyst at Merrill Lynch.
"We've seen any rallies immediately sold off ... and we're
seeing a continuation of that today."
"There are also some technical issues as the open interest
is quite long in TOCOM in Japan," he added. "The view is that
that is pushed to the max, and consequently signs of weakness
are resulting in some long liquidation as well."
However, in the long term the metal remains well supported,
with buying interest typically returning to the market below
$2,000 an ounce, he added.]
Palladium <XPD=> dipped to $443.50/451.50 against
$448.50/456.50 an ounce.
(Reporting by Jan Harvey; Editing by Peter Blackburn)
