* Premiums for gold bars jump to 2-year high
* Portugal, euro zone debt in focus
* Coming Up: U.S. ICSC chain stores; 1245 GMT
(Updates with comment, updates prices)
By Amanda Cooper
LONDON, Jan 11 (Reuters) - Gold rose for a second day on
Tuesday, driven by deepening worries about the spread and
severity of the European debt crisis, and a pickup in investment
demand also provided support.
The decline in the gold price to around one-month lows last
week has encouraged an improvement in consumer demand in China
ahead of the Lunar New Year in early February, pushing premiums
for gold bars to their highest in two years.
After several weeks of almost unrelenting outflows, some of
the larger exchange-traded funds backed by physical gold have
also seen a pick-up in investor demand, in spite of the decline
in the euro, which would normally erode appetite for gold.
Spot gold <XAU=> rose 0.60 percent to $1,382.52 an ounce by
1420 GMT, while U.S. gold futures for February delivery were up
0.7 percent at $1,382.90. The spot price is about 4 percent off
December's record high of $1,430.95 an ounce.
The concerns in the fixed-income markets over the likelihood
of an international bailout for Portugal, which would be the
third in a year after the rescues of Greece and Ireland, have
undermined investor confidence and given gold a boost.
"What is interesting at the moment is the ETFs have show
sone liquidiation, but the market is able to rally," said HSBC
analyst James Steel.
"The market is able to rally despite the fact the euro is
still weak and that is evidence that the safe-haven demand for
gold has eclipsed the weakness in the euro because they've both
reacted to the sovereign debt crisis."
EURO WOBBLES
The euro steadied above a four-month low on Tuesday, after
Japan said it may buy about a fifth of the bonds a European
rescue fund plans to sell later this month to finance its
bailout scheme for Ireland. []
The focus this week is on whether Lisbon will be able to
raise funds in the debt market on Wednesday or be forced to
turn to the EU and IMF for financial aid.
But depending on how the various governments decide to
tackle their debt burdens could have different impacts on gold,
analysts said.
"We think you can look at the European situation in two ways
-- where you have governments that are overindebted and need to
get themselves out of that problem...they can try to inflate
their way out of difficulty, which is where you'd want to be
holding gold instead, or can go down a route of fiscal
retrenchment," said Natixis commodities analyst Nic Brown.
"If it is clear that governments are going through a period
of austerity to rebuild their fiscal credibility, then
ultimately, there comes a point where European investors who
have moved into gold will no longer need it," he said.
Gold, which rose by 30 percent last year, was a key
beneficiary of investor concern over the fallout from the euro
zone debt crisis.
Premiums for gold bars hit their highest in two years on
Tuesday as concern about inflation encouraged Chinese investors
to buy bullion ahead of the new year.
"There's a huge demand from China. Refineries just opened
and there's not much stock around, so it's a bit tight," said
Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.
The physical sector in Singapore was steady after seeing
heavy buying from jewellers in Thailand on Monday, which could
be related to inflation fears there.
The world's largest gold-backed exchange-traded fund, SPDR
Gold Trust <GLD>, said its holdings rose for the first time
since mid-December to 1,272.682 tonnes by Jan. 10. []
Silver <XAG=> rose for a second session, up 1.7 percent on
the day to $29.52 an ounce.
While silver enjoyed a large boost from investor interest
and rising ETF holdings last year, many analysts say the price
is vulnerable to a larger downward correction than gold given
the extent of the price rise in the last 12 months and the
metal's inherent volatility.
Holdings of silver in the iShares Silver Trust <SLV>, the
biggest silver-backed ETF, have fallen by over 100 tonnes in the
last month alone.
Platinum <XPT=> was set for a fourth consecutive daily rise,
up 1.0 percent at $1,755.24 an ounce, while palladium <XPD=>
rose 3.4 percent, up for a second day, at $775.23.
(Additional reporting by Lewa Pardomuan in Singapore; editing
by William Hardy)
