* European equities tumble in early trade, tracking Asia
* Gold hits 2-1/2 month high as investors seek safer assets
(Recasts, updates, changes dateline, pvs SINGAPORE)
By Jan Harvey
LONDON, Oct 10 (Reuters) - Gold climbed 2 percent to a 2-1/2
month high in Europe on Friday as tumbling stock markets
prompted investors to seek safer assets such as bullion.
Spot gold <XAU=> was quoted at $918.15/921.65 an ounce at
0929 GMT against $911.50 an ounce late in New York on Thursday.
Earlier it touched a session high of $931 an ounce, its
strongest level since July 29.
"The weakness in the stock markets in Europe sent gold
higher to take out the $930 level," said Peter Fertig, a
consultant at Dresdner Kleinwort. "But as equities recovered
from initial lows, gold came down a little."
"Currently it is fear that is dominating," he added. "We are
seeing a flight to safety. It is only gold that shines."
European stocks slid at the open, tracking losses in Asia
and on Wall Street late Thursday, as investors worried concerted
efforts from governments and central banks to stabilise the
financial markets would fail to avert recession. []
Losses in Europe reflected panic selling in Asia. The
benchmark world equity index, MSCI, fell to a five-year trough.
[]
Equity trading in Russia, Iceland, Romania, Ukraine,
Indonesia and Austria was halted, while nearly half of Milan
stocks are suspended for excessive losses.
Banks led the decline among European stocks, with oil shares
also tumbling as crude oil prices fell.
Crude futures hit a one-year low as fears that economic
turmoil would cut demand outweighed the possibility of a looming
production cut from oil cartel OPEC. []
Gold often moves in line with crude prices, as it can be
bought as a hedge against inflation. However, traders say in the
current climate gold is trading with greater independence from
its usual external drivers, oil and the dollar.
The dollar hit a 14-month high against a basket of
currencies as investors sold emerging market stocks and rushed
back to the relative safety of the U.S. currency. []
A firmer dollar typically pressures gold, but as safe-haven
buying dominates the market, it is having less influence that
usual on the metal.
Demand from larger investors for bullion-related products
like gold-backed exchange traded funds, and from smaller buyers
for investment coins and bars, remains strong, analysts say.
"Various mints of gold coins are struggling to keep up with
demand and premiums for physical metal are reported to be
running high," Fairfax analyst John Meyer said.
The world's largest bullion-backed ETF, New York's SPDR Gold
Trust, said its holdings rose to a record 765.74 tonnes on
Thursday as investors sought a haven from risk.
However, higher prices are causing some selling in India
ahead of this month's Hindu festivals.
"There are a lot of sellers today, mainly holders of small
quantities of jewellery and bars," Jitendra Kantilal, a partner
at bullion dealer Jugraj Kantilal & Co, told Reuters.
Among other precious metals, silver was quoted at
$11.68/11.76 against $12.01 late in New York on Thursday.
The platinum group metals inched lower. Spot platinum <XPT=>
was trading at $1,002.50/1,026.50 an ounce against $1,018.50,
while its sister metal palladium <XPD=> edged down to $193/203
from $198.
Both PGMs have suffered from fears over falling demand from
carmakers, who account for around half of global consumption.
However, analysts say in the longer term palladium is likely to
find better support than platinum.
"Not only do we expect palladium prices to recover next year
and beyond but they could outperform platinum," said RBS
strategists in a note.
"A wild card is the depletion of the Russian government's
stockpile."
(Reporting by Jan Harvey; editing by Michael Roddy)
