* Euro zone debt, U.S. deficit fears keep markets on edge
* Investors still eyeing $1,500/oz psychological resistance
* Gold:silver ratio at lowest in 28 years
(Updates prices)
By Jan Harvey
LONDON, April 19 (Reuters) - Gold rose back towards the
previous session's record high near $1,500 an ounce on Tuesday,
with appetite for risk fragile after Standard & Poor's cut its
U.S. outlook and as euro zone sovereign debt concerns simmered.
Prices rose to a record $1,497.20 an ounce on Monday after
the S&P announcement rocked the markets but slipped back quickly
after running into strong resistance at higher levels.
Spot gold <XAU=> was bid at $1,494.05 an ounce at 1111 GMT,
against $1,495.08 late in New York on Monday. U.S. gold futures
for June delivery <GCv1> rose $2.20 an ounce to $1,495.10.
"Most of the trends out there -- whether that's worries
about the euro, worries about coming inflation, worries about
U.S. debt, Chinese buying seeming relatively strong -- suggest
the price ought to be going higher," said David Jollie, an
analyst at Mitsui Precious Metals.
"It seems there is a reasonable appetite still to buy, but
if you look at the pace, it has gone up at in the last week.
That doesn't seem sustainable," he added.
"It would be a surprise if we don't get to $1,500 an ounce,
but it would also be a surprise if we shot through it."
The euro steadied against the dollar on Tuesday after the
previous day's sell-off, but debt problems in the euro zone kept
investors wary of the single currency. []
The CBOE Volatility Index, Wall Street's favourite barometer
of investor anxiety known as the VIX <.VIX>, jumped as much as
24.5 percent on Monday after S&P warned about the towering U.S.
budget deficit. [][]
Risky assets were hit by a double-whammy on Monday after
fears mounted that Greece will have to restructure its debt,
maybe as early as this summer, and S&P threatened to cut the
United States' AAA credit rating.
FISCAL CHALLENGES
"The agency's comment that 'there is at least a one in three
likelihood that it could lower its long-term rating on the US
within two years' was interpreted by the gold community as
reflecting the seriousness of U.S. fiscal challenges and hence
provided a catalyst for higher prices," said UBS in a note.
"That the fiscal spotlight is now on the U.S. is
gold-positive," it added.
Oil prices continued to correct, however, with U.S. crude
futures falling by $1 a barrel in early European trade. Strength
in crude after unrest across the Middle East and North Africa
earlier this year was a key factor driving gains in gold. []
Rising crude prices tend to lift gold, which is often seen
as a hedge against oil-led inflation. Signs that inflation is
becoming a major issue in emerging markets, particularly China,
has been identified as another support to the precious metal.
Silver <XAG=> also held near the previous session's 31-year
high of $43.51 an ounce, last bid at $43.21 an ounce against
$43.32 on Monday.
Silver has outperformed gold this year, up 40 percent so far
against gold's 5 percent rise. The gold:silver ratio slipped to
a 28-year low below 35 on Monday.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For graphic showing the gold:silver ratio:
http://r.reuters.com/jyx88r
Graphic showing gold prices in inflation-adjusted terms:
http://r.reuters.com/ren88r
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
Among other precious metals, platinum <XPT=> was at
$1,780.35 an ounce against $1,772.65, while palladium <XPD=> was
at $739 against $739.93.
(Editing by James Jukwey and Jane Baird)
