* Gold supported as SNB sells francs against dollar, euro
* Bullion ends off early session highs as Wall St rises
* SPDR ETF holdings rise to record on March 11
(Updates with quotes, closing prices, market activity)
By Paul Lauener and Jan Harvey
LONDON, March 12 (Reuters) - Gold jumped 2 percent on
Thursday, boosted after the Swiss National Bank sold francs
against the euro and raised the specter of a race to devalue
major currencies.
A Wall Street rally, however, took some steam out of
bullion's gains as S&P cut General Electric's ratings by just a
single notch and signaled no further downgrades. The Dow Jones
industrial average added nearly 200 points, or 3 percent.
Analysts said the SNB intervention means one of the world's
safest currencies is being deliberately undermined to help
boost growth and that other countries could follow.
[]
"If all currencies are being devalued against each other
then gold is a currency which is going to profit from it,"
Commerzbank analyst Eugen Weinberg said.
"So we have bad currencies, worse currencies and the worst
currencies, and gold could be an alternative stable currency in
this case," Weinberg said.
Spot gold <XAU=> was at $920.80 an ounce at 1:45 p.m. EDT
(1745 GMT), up 1.6 percent from its last quote $906.65 in New
York late Wednesday.
U.S. gold futures for April delivery <GCJ9> settled up
$13.30, or 1.5 percent, at $924.00 an ounce on the COMEX
division of the New York Mercantile Exchange.
The Swiss franc had its biggest ever one-day drop against
the euro after the SNB said it had sold francs as part of a
drive to boost the economy, which also includes an interest
rate cut and planned bond buy. []
"The SNB have now fired the first formal shot in the
forthcoming currency war," ING Bank said in a note.
The world's largest gold-backed ETF, the SPDR Gold Trust
<GLD>, said its holdings hit a record 1,038.17 tonnes on
Wednesday, fueling expectations investor demand will remain
strong.
PRODUCTION DROPS
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. []
South Africa is the world's second-biggest gold producer
after China.
Metals consultancy GFMS said the rate of producer dehedging
-- 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 decrease further 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," Fairfax analyst
John Meyer said.
Among other precious metals, spot silver <XAG=> was at
$12.94 an ounce, up 1.5 percent from its Wednesday finish of
$12.75.
Spot platinum <XPT=> was at $1,046.50 an ounce, down 0.3
percent from its previous close of $1,050, while spot palladium
<XPD=> was a touch firmer at $195.50 an ounce, up 0.3 percent
from its late Wednesday New York quote of $195.
(Additional reporting by Frank Tang and Pratima Desai; Editing
by Christian Wiessner)
