Gold rose Wednesday as volatility in the currency markets and fears about the outlook for the euro prompted buying of the precious metal as a haven from risk.
Interest in physical gold remained high, with holdings of the world's largest gold exchange-traded fund, New York's SPDR Gold Trust, rising 30.4 tons on Tuesday to a record 1,267.3 tons, its biggest one-day inflow since Feb. 12, 2009.
Spot gold was bid at $1,212.40 an ounce late Wednesday, up from $1,200.10 late in New York on Tuesday. U.S. gold futures for June delivery on the COMEX division of the New York Mercantile Exchange rose $16.90 to $1,214.90 an ounce.
Prices are recovering after falling 4.5 percent last week as concern over the euro zone's sovereign debt crisis sparked selling of assets seen as higher risk, like stocks and commodities.
"Once the correction had run its course, buyers felt more comfortable about jumping in again," said Ole Hansen, senior manager at Saxo Bank. "ETF holdings still making new highs is also supporting the move."
"Gold will be well supported as debt fears and Korea won't go away, especially if the debt crisis turns into another banking crisis."
Geopolitical concerns centered on the Korean peninsula, where tensions are increasing, were cited by some analysts as supportive for gold.
"At the moment, not only financial jitters but also geopolitical concerns over what could be happening in Korea are also (helping gold)," said Commerzbank analyst Eugen Weinberg.
The euro came off lows after earlier falling toward a four-year trough versus the dollar after Federal Reserve Chairman Ben Bernanke raised the possibility that its dollar funding facility would not last forever, lifting risk aversion. The euro was at $1.2215 late Wednesday.
Speaking in Tokyo, Bernanke said dollar swap lines, which were reinstated as the Greek debt crisis escalated, played an important role in stabilizing markets, but that the Fed did not want to provide a permanent service.
Commodity and equity markets rose, however, rebounding from previous losses. European equities bounced back from nine-month lows hit a day earlier, extending gains after U.S. durable goods data beat expectations.
Oil climbed nearly 3 percent after a report showing a drop in U.S. gasoline stockpiles, while industrial metals like copper, aluminum and zinc climbed.
Gold is also picking up momentum as ETFs continue to buy bullion. The 108-tonne inflow into the SPDR fund this month alone is worth some $4.179 billion.
"The combination of factors has seen investors shift money out of equities and riskier assets, toward the safe havens of gold and certain government bonds," Standard Bank said in a research note.
Platinum was at $1,525 an ounce against $1,515.50, while palladium was at $447.00 against $436. Spot silver was bid at $18.27 an ounce against $17.86.
"We expect the volatile trade to continue short-term (in platinum group metals) as fund/speculative players are still sitting on substantial longs while investors have used the dips to increase their exposure," said TheBullionDesk.com analyst James Moore.
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