* Indian gold, euro-priced gold hit records
* Talk of China interest in gold also helps
* Silver hits highest level since Oct 1
(Updates throughout, changes dateline from SINGAPORE)
By Jan Harvey
LONDON, Jan 30 (Reuters) - Gold rallied more than 2 percent
in Europe on Friday to a three-month high, as investors once
again sought the safety of bullion from volatility in other
assets.
Market talk of China taking an interest in gold as an
alternative to U.S. Treasuries, and of a European fund buying
bullion, also helped boost prices.
Trading is expected to be choppy this session as key
technical levels are pressured, dealers said.
Spot gold <XAU=> climbed to a high of $926.10 an ounce, and
was quoted at $918.50/920.50 an ounce at 1018 GMT, up from
$906.75 in New York late on Thursday. Gold priced in euros
<XAUEUR=R> hit a record high of 720.53 euros.
Gold has risen around 3 percent this week as investors have
scrambled for the safety of gold and bullion-backed assets such
as exchange-traded funds.
"The ETFs were up another 15 tonnes yesterday," Simon Weeks,
director of precious metals at the Bank of Nova Scotia, said,
adding safe haven demand was driving the market.
The world's biggest gold-backed ETF, New York's SPDR Gold
Trust <GLD>, said its holdings jumped more than 10 tonnes on
Thursday to a record 843.59 tonnes. []
ETFs, which issue exchange-traded securities backed by
physical gold, have proved a popular alterative to investment
products such as bullion bars and coins. SPDR's holdings have
risen more than 63 tonnes or 8 percent since Dec 31.
Equities were volatile. Signs of the deepening global
recession knocked stocks lower for a second day, although
European shares rose after earlier losses. []
A new wave of risk aversion also hit the currency markets,
with the yen and dollar edging higher as investors worried about
risk after a spate of poor economic data. []
Although gold usually moves in the opposite direction to the
dollar, the negative correlation between the two has broken down
in recent weeks as both assets gained on risk aversion.
RICH
"Gold prices have benefited from a renewed surge of
inflows into gold ETFs," Deutsche Bank said. "We believe this
has enabled the gold price to trade at relatively rich levels
when compared to EUR/USD."
But jewellery demand remains hamstrung by high prices. In
India, the world's biggest bullion market, gold futures touched
an all-time high of 14,407 rupees per 10 grams, deterring buyers
from purchases. []
Scrap sales are booming, however, as consumers cash in on
the price rise.
Silver prices tracked gold higher, rising to a peak of
$12.57 an ounce, their highest since Oct 1. It was later quoted
at $12.46/12.53 an ounce against $12.31.
Silver ETFs have also risen sharply this year, with the
largest, the iShares Silver Trust <SLV.A>, up 660 tonnes or 10
percent in the year to date.
"Silver is still relatively cheap compared to gold and
therefore a good alternative for investors in hedging against
risks," Commerzbank analyst Eugen Weinberg said. "Hence, we see
further upside potential for silver."
Among other precious metals, platinum and palladium were
little changed. Platinum <XPT=> was at $971.50/976.50 an ounce
against $972.50, while palladium <XPD=> was at $191.50/195.50 an
ounce, against $191.50.
A Reuters survey of 56 precious metals analysts and traders
showed most expected the platinum group metals to post
significant losses this year as the global economic slowdown
pressures demand. []
(Editing by Sue Thomas)
