Gold hits 6-1/2 week high

Gold bars are displayed to be photographed at bullion house in Mumbai December 3, 2009.

NEW YORK/LONDON (Reuters) - Gold rose to 6-1/2 week highs on Wednesday as the euro's recovery against the dollar amid easing worries about a Greek debt crisis increased the metal's appeal as a hedge against currency volatility.

Spot bullion has increased for a fifth consecutive session, as the metal is benefiting not only from the dollar's weakness, but also from fears over financial instability in general. Gold priced in euro and sterling both hovered near record highs.

Uncertainty over plans to tackle Greece's fiscal crisis and over what the next British election may mean for U.K. debt have heightened volatility in the European currencies, lifting interest in gold as an alternative asset, analysts said.

"The market is looking for some security with gold," said Commerzbank analyst Eugen Weinberg. "The problems in the euro zone, and the problems in Greece, may well pull people into the gold market as they look for diversification and security."

Gold has traditionally been used as a safe haven in times of economic and political uncertainty, as the metal's intrinsic value is not dependent on any paper currency.

Spot gold was at $1,139.65 an ounce at 2:46 p.m. EST (1946 GMT), against $1,134.50 late in New York on Tuesday. It hit a high of $1,144.60 earlier in the session, the loftiest since January 15.

U.S. gold futures for April delivery on the COMEX division of the New York Mercantile Exchange settled up $5.90 at $1,143.30 an ounce.

The euro rose after Greece announced plans for a further $6.55 billion in pay cuts and tax hikes to reduce its crippling deficit.

Concern over the fiscal health of peripheral euro zone economies such as Greece, Italy and Spain have weighed heavily on the euro this year. It is currently down nearly 5 percent versus the dollar in 2010.

The euro also benefited on Wednesday from data showing the U.S. private sector shed 20,000 jobs in February, in line with expectations. The numbers are seen as an important precursor to key U.S. non-farm payrolls data due on Friday.

Gold's inflation hedge appeal should increase after the Federal Reserve Beige Book summary showed economic activity strengthened modestly during February.

EURO, STERLING GOLD FIRM

Gold prices held near the record highs they hit on Tuesday in euros and sterling terms, boosted by volatility in the foreign exchange markets.

"Gold is being used as a bit of an alternative to currencies," said Citigroup analyst David Thurtell. "It takes you out of dollar or euro exposure and puts you into a non-currency."

Euro-priced gold hit a high of 835.97 euros an ounce, close to the previous session's record 836.72 an ounce, while gold priced in sterling rose as high as 758.99 pounds an ounce, just off its record high of 759.86 an ounce.

SPDR Gold Trust, the world's largest gold-backed exchange traded fund, posted an inflow of about 4.6 tonnes on Tuesday, its first increase in holdings since February 23.

Among other commodities, oil climbed above $80 a barrel on the weak dollar and better economic sentiment. <O/R>

Silver was at $17.17 an ounce against $16.92, having earlier touched a five-week high of $17.33.

Platinum was $1,574 an ounce against $1,566.50, while palladium was $446 against $439.

Close Change Pct 2009 YTD

Chg Close % Chg US gold 1143.30 5.9 0.5 1096.20 4.3 US silver 17.329 0.265 1.6 16.845 2.9 US platinum 1583.50 7.50 0.5 1471.00 7.6 US palladium 450.50 5.65 1.3 408.85 10.2

Prices at 2:27 p.m. EST (1927 GMT) Gold 1140.20 5.70 0.5 1096.35 4.0 Silver 17.20 0.28 1.7 16.84 2.1 Platinum 1573.00 6.50 0.4 1465.50 7.3 Palladium 447.00 8.000 1.8 405.50 10.2

Gold Fix 1136.50 0.25 0.0 1104 2.9 Silver Fix 17.17 60.00 3.6 16.99 1.1 Platinum Fix 1580.00 1.00 0.1 1466 7.8 Palladium Fix 444.00 0.00 0.0 402 10.4

(Reporting by Frank Tang and Jan Harvey; Editing by Lisa Shumaker)