* Gold seen on upward track, risk aversion persists
* SPDR holdings hit record 1,209.499 T as of May 12.
* Gold priced in sterling, euro hits a record high
(Adds comment, updates prices)
By Pratima Desai
LONDON, May 13 (Reuters) - Gold steadied on Thursday, but
analysts expect the precious metal to extend gains to new
records over coming days as waves of investor money come
flooding into the market looking for safety.
In euro and sterling terms, bullion hit a record high as the
as investors moved to the yellow metal as a haven from soverign
risk in the euro zone.
Spot gold <XAU=> was bid at $1,236.15 a troy ounce at 1343
GMT from $1,236.35 an ounce late in New York on Wednesday, when
it hit a record $1,248.15 on fears that a $1 trillion European
rescue package will not solve the euro zone debt crisis.
However, the European Central Bank's commitment to buy euro
zone government bonds has dampened gold market sentiment as it
cuts chances of sovereign default in the bloc. []
But analysts say risk aversion still dominates market
psychology and the fact that gold has moved up alongside the
dollar <EUR=> <.DXY> only reinforces investor bias towards the
precious metal.
"I think we could easily see a new record high before the
weekend," said analyst Walter De Wet at Standard Bank, referring
to the spot gold price. "But also ...at these levels smaller
than usual volumes could push prices higher," he added.
Gold priced in sterling <XAUGBP=R> rose to a record high of
840.95 pounds an ounce while euro-priced gold <XAUEUR=R> touched
an all-time high of 988.92 euros per ounce as the dollar gained
versus sterling and the euro. []
The U.S. currency extended gains versus the euro, which had
fallen to a one-week low, after data showing a decline in weekly
U.S. jobless claims. []
Traditionally gold moves in the opposite direction to the
dollar, which when it rises makes commodities more expensive for
holders of other currencies.
"What is bullish for gold is the coincident dollar strength.
Similar to that in late 2008 and early 2009 after Lehman's
bankruptcy -- a period of heightened risk aversion," said Dan
Brebner, analyst at Deutsche Bank. "Over the next 6 months we
could see a 25-30 percent increase in gold."
COMPETING CURRENCIES
Strong investor interest in gold can be seen in the holdings
of the world's largest gold-backed exchange-traded fund, SPDR
Gold Trust <GLD>, which said its holdings stood at a record high
of 1,209.499 tonnes as of May 12.
"What we have seen is, ETF holdings have been pretty sticky
and we haven't seen a lot of selling whenever the global macro
picture has improved. People tend to hold onto their holdings,"
De Wet at Standard Bank said.
U.S. gold futures <GCM0> hit a record peak of $1,249.2 an
ounce on Wednesday. They were last at $1,240 an ounce, down
about $3 from the previous session.
Investors use gold as a hedge against financial and
political turbulence and as a store of value during times of
high inflation, which erodes wealth.
"Gold is the ultimate store of value and the best hedge
against sovereign or inflation risks," VTB Capital said in a
note. "The rush of investors into gold is unlikely to abate
anytime soon, especially now that traditionally hawkish Eurozone
central bankers might have to engage in quantitative easing."
Loose monetary policy, focus on growth and some concern that
governments could use inflation to devalue their debt is another
reason cited for gold's popularity. []
Fears that governments around the world will resort to
competitive devaluations of their currencies to boost economic
activity is another plus for gold.
"In the kind of environment where countries compete using
their currencies, gold will of course appreciate," Brebner said.
Spot silver <XAG=> was at $19.59 an ounce from $19.48,
platinum <XPT=> at $1,726.00 from $1,736.50 and palladium <XPD=>
at $541 from $540.
(Additional reporting by Humeyra Pamuk, Editing by Keiron
Henderson)
