* Gold rises to four-month high of $970.70
* Financial turmoil fears, weaker dollar boost gold
* ETF holdings climb to a record
(Recasts, adds comment, detail)
By David Sheppard
LONDON, July 14 (Reuters) - Gold rose to a four-month high
above $970 an ounce on Monday as lingering fears of financial
market instability and rising inflation boosted buying of the
metal for its safe haven appeal.
Spot gold <XAU=> climbed $970.70 an ounce -- the highest
since March 19 -- before easing to $968.15/$969.150 an ounce at
1509 GMT from $963.00/965.00 late in New York on Friday.
Gold has soared since fears over the future of U.S. mortgage
firms Fannie Mae <FNM.N> and Freddie Mac <FRE.N> came to the
fore on Friday, dragging down equities and the dollar.
U.S. stocks slipped on Monday as investors worried that
plans to shore up the government sponsored mortgage companies
won't be enough to allay concerns about the fallout from the
housing slump in the world's biggest economy. []
"The issue of Fannie May and Freddie Mac's stability
definitely brought the fear factor back," said Daniel Hynes,
metals strategist at Merrill Lynch.
"A month ago, gold looked like it might have struggled to
get back towards $1,000 but it now looks like it could be
heading back towards those levels."
Gold dipped earlier on Monday after a firmer tone in the
U.S. dollar encouraged pockets of profit-taking. However the
dollar later retreated as stocks fell. []
Oil prices above $146 a barrel were also supporting gold, as
many investors use the precious metal to hedge against fuel-led
inflation. []
HEIGHTENED RISK
Bullion held by the New York-based SPDR Gold Trust <GLD.P>
<GLD.A>, the world's largest gold-backed exchange-traded fund,
jumped to a historic high of 705.90 tonnes on Friday amid
nervousness over Fannie Mae and Freddie Mac.
Investment bank UBS on Monday raised its short-term gold
price forecast to $1,000 an ounce over the next month, against a
previous forecast for $900, citing heightened risk aversion and
ETF holdings. []
Gold hit a record above $1,000 per ounce in March on a
combination of historic dollar weakness, rising oil prices and
widespread financial market fears in the wake of the near
collapse of Bear Stearns.
Commerzbank trader Michael Kempinski said gold could be
heading back towards $1,000 an ounce.
"The general direction is to the upside at the moment, with
the dollar still weak, oil at record highs and safe haven buying
increasing. We see resistance at $990, but if oil continues to
move higher I see it pushing through."
However, slowing physical demand from jewellers in response
to higher prices continues to weigh on gold, with Turkish gold
exports on Monday reported to have fallen by 25.5 percent to 5.8
tonnes in June.
Spot platinum <XPT=> rose to $2,0085.00/2,028.00 an ounce
from $2,023.00/2,043.00 late in New York on Friday. Spot
palladium <XPD=>eased to $446.50/454.50 an ounce from
$448.50/456.50 an ounce.
Silver tracked gold higher to trade at $19.00/19.06 an ounce
from $18.76/18.84 late in New York on Friday.
(Editing by David Evans)
