* Euro-zone-risk concerns fuel flight-to-quality buying
* Palladium climbs in recovery from last week's slide
* Coming up: U.S. consumer confidence in May on Tuesday
(Adds link to Reuters Insider piece on gold poised for upside
breakout)
By Chris Kelly and Jan Harvey
NEW YORK/LONDON, May 24 (Reuters) - Gold gained over 1
percent on Monday, snapping five consecutive days of losses as
lingering concerns over the fiscal health of the euro zone
helped to restore the precious metal's flight-to-quality
status.
Stock markets slipped and the euro extended losses after
the Spanish central bank's takeover of a savings bank
underlined structural problems facing fiscally fragile euro
zone states.
"You have flight-to-quality buying today," said Bill
O'Neill, managing partner with LOGIC Advisors.
"The yen gained on the euro, the dollar gained on the euro,
gold is up, and treasury yields are down again, so today is
definitely a return to the flight to quality," he said.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphic of commodities' relative price performance this year:
http://link.reuters.com/hun72k
Reuters Insider looks at gold poised for upside breakout:
http://link.reuters.com/qym95k
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
Spot gold <XAU=> was bid at $1,194.95 an ounce at 1804 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 ended up $17.90, or 1.5 percent, at $1,194
an ounce.
"The sovereign risk crisis in Europe is far from over, and
I think that is going to continue to bode well for gold through
the summer," O'Neill said.
The euro <EUR=> slid against the dollar as investors cut
risk in their portfolios after news the Bank of Spain was
taking control of savings bank CajaSur. [] []
A stronger dollar usually weighs on gold, but the
traditionally strong inverse link between the two assets has
weakened as both are benefitting from risk aversion.
"Traditionally, a weaker euro is negative for gold, but in
this atmosphere, it is positive as it is a sign of increased
risk," said James Steel, chief commodity analyst at HSBC in New
York.
Holdings of the main gold exchange-traded fund, the SPDR
Gold Trust <GLD>, remain at record levels, but new investments
have slowed in recent days, reflecting the recent bout of
increased risk and volatility in the market, Logic Advisors'
O'Neill said.
"It shows there is a high level of speculative
participation," he said.
GOLD TO BENEFIT
Euro-priced gold <XAUEUR=R> also rose 2.8 percent on Monday
after tumbling 6 percent last week, despite hitting a record
high of $1,012.81 euros an ounce on May 17.
"While Greece did trigger the EU/IMF rescue, we believe
this is just the beginning of a new chapter in Greek tragedy
with the contagion risk well intact," said Bradley Yim, senior
research analyst at Castlestone Management in a note.
"In our view, gold will continue to benefit from the
combination of reaching a new high in euro terms, sliding
global equities, the situation in Greece, the ECB's reluctance
to buy Greek bonds, and soaring demand for gold bars."
While ETF holdings are near record levels, high prices have
hurt jewelry demand.
Italian precious metal jewelry 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
jewelry trade show said on Saturday. []
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.
In late trade, palladium <XPD=> was at $447 versus $433.50,
off a high of $453, and platinum <XPT=> was at $1,529 versus
$1,504.50.
UBS analyst Edel Tully said in a note that a report
released by the U.S. Commodity Futures Trading Commission
showed a sharp drop in interest in palladium in New York last
week.
"Palladium was the heavy loser in the pack, with the NYMEX
book falling 8.7 percent or 160,000 ounces. This represented
the biggest one-week percentage decline since the week of Sept
29 last year," she said.
Silver <XAG=> was bid at $17.98 an ounce against $17.59.
Close Change Pct 2009 YTD
Chg Close % Chg
US gold <GCM0> 1194.00 17.9 1.5 1096.20 8.9
US silver <SIN0> 18.000 0.349 2.0 16.845 6.9
US platinum <PLN0> 1534.50 33.30 2.2 1471.00 4.3
US palladium <PAM0> 453.55 14.10 3.2 408.85 10.9
Prices at 2:13 p.m. EDT (1813 GMT)
Gold <XAU=> 1194.25 19.10 1.6 1096.35 8.9
Silver <XAG=> 17.98 0.39 2.2 16.84 6.8
Platinum <XPT=> 1529.50 25.00 1.7 1465.50 4.4
Palladium <XPD=> 448.00 14.500 3.3 405.50 10.5
Gold Fix <XAUFIX=> 1187.00 3.25 0.3 1104 7.5
Silver Fix <XAGFIX=> 17.78 6.00 0.3 16.99 4.6
Platinum Fix <XPTFIX=> 1525.00 1.00 0.1 1466 4.0
Palladium Fix<XPDFIX=> 450.00 4.00 0.9 402 11.9
(Additional reporting by Humeyra Pamuk; editing by James
Jukwey, Sue Thomas and Jim Marshall)
