* Weak equities boost gold's appeal as safe store of value
* SPDR ETF holdings rise 9.18 tonnes to record on Feb 11
(Updates throughout, previous TOKYO)
By Paul Lauener
LONDON, March 12 (Reuters) - Gold rose in Europe on Thursday
as the world's largest gold-backed exchange-traded fund's
holdings set a record and Wednesday's equity rally fizzled out,
boosting the appeal of gold as a safe investment.
Spot gold <XAU=> rose to $913.15/$914.15 an ounce at 1054
GMT from $906.65 late in New York on Wednesday.
The world's largest gold-backed ETF, the SPDR Gold Trust
<GLD>, said its holdings hit a record on Wednesday, fuelling
expectations investor demand will remain strong. They rose 9.18
tonnes or nearly 0.9 percent to 1,038.17 tonnes
"Investor demand for gold is there until we see a sustained
rally in equities," said VTB Capital analyst Andrey Kryuchenkov.
Gold is typically seen as a haven from weak equities and
financial sector instability.
European shares fell on Thursday, tracking declines in Asian
stock markets amid renewed worries about the health of the
global economy. []
U.S. stock index futures also pointed to a lower open on
Wall Street, on rekindled fears over the global economic outlook
and stability of the financial system. []
"The inability of the equity markets to build on gains
created a climate conducive to higher gold prices... as
risk-averse buyers moved cautiously back into bullion," said
HSBC analyst James Steel.
The dollar meanwhile strengthened 0.5 percent against the
euro as a recent run of risk appetite ran out of steam, boosting
interest in the currency as a haven. []
While a stronger dollar usually pressures gold, which is
typically bought as an alternative to the currency, both assets
are moving in the same direction at present as they take their
cues from risk aversion.
Among other commodities, oil rebounded towards $43 a barrel
after a 10 percent fall in the past two sessions. []
In production news, South African gold output fell 8.7
percent in volume terms and total mineral production dropped 11
percent in January compared with the same month in the previous
year [].
The country is the world's second biggest gold producer
after China.
Broker Numis Securities cited falling mine supply, along
with risk aversion, physical bullion demand, and the prospect of
rising inflation and a weaker dollar, as behind a decision to
raise its 2009 gold price forecast to $900 an ounce from $700.
[]
Elsewhere, metals consultancy GFMS said the rate of producer
de-hedging -- in which miners buy back gold they had previously
sold forward to regain exposure to rising prices -- slowed in
the fourth quarter of 2008 and will further decrease this year.
Dehedging was a major source of gold demand in recent years,
but the rate of activity has slowed naturally as the global
hedgebook has diminished. []
"Higher gold prices tend to make miners keen to dehedge
historic gold positions, but the expense of the dehedging can
also dissuade miners from taking the pain," said Fairfax analyst
John Meyer.
He said many miners prefer to wait for a pull-back in gold
prices before closing out further forward sales.
Among other precious metals, spot silver <XAG=> was at
$12.84/12.91 an ounce against $12.75 late in New York on
Wednesday.
Spot platinum <XPT=> edged down to $1,047/1,052 an ounce
against $1,050, while spot palladium <XPD=> was a touch firmer
at $195.50/199.50 an ounce against $195.
Both metals, which are primarily used in car manufacturing
as a component in catalytic converters, are suffering from fears
over the global economic outlook.
(Additional reporting by Jan Harvey; Editing by Peter Blackburn)
