NEW YORK/LONDON (Reuters) - Gold prices were nearly flat on Thursday as the market took a breather after the metal raced to two consecutive record highs, but economic jitters over a $1 trillion European rescue plan supported prices.
Even with Thursday's market pause, gold's rally in dollar terms now stands at 7 percent from a week ago. Worries about the European rescue plan also sent gold priced in euros and sterling to record highs.
Silver and platinum group metals were also unchanged as choppy currency and equity markets showed signs of stabilizing. U.S. stock markets steadied after volatility soared in the last several sessions.
Michael Daly, gold specialist at Chicago-based futures broker PFGBest, said overnight profit-taking weighed on gold. But, he added, economic uncertainties and the upcoming Indian festival of Akshaya Tritiya, a major gold-buying event, should support prices.
"There is a lot of uneasiness with the European Union and investors are weary right now. If central banks continue to print money at this rate, there will be inflation to follow and I think people are protecting their wealth" by buying gold, Daly said.
Spot gold was at $1,232.75 an ounce at 2:58 p.m. EDT (1858 GMT), nearly flat from $1,236.35 an ounce late in New York on Wednesday, when it hit a record $1,248.15 on fears that the massive European rescue package will not solve the euro zone debt crisis.
U.S. gold futures settled down $13.90, or 1.1 percent, at $1,229.20 an ounce.
Demand for both physical and paper gold investment was strong, with sales of coins, bars and exchange-traded gold funds soaring, and open interest in U.S. futures inching closer to a record high.
"The bullish overtone in the market has reached an all-time high," said Scott Meyers, senior futures analyst with Pioneer Futures in New York, referring to the hike in open interest.
"There doesn't seem to be any limit to where this market can go. There are a plethora of things from geopolitical tensions to uncertain market conditions for investors to point to hard tangible assets like gold."
Investors use gold as a hedge against financial and political turbulence and as a store of value during times of high inflation, which erodes wealth.
Loose monetary policy, a focus on growth and some concern that governments could use inflation to devalue their debt and their currencies to boost economic activity is another reason cited for gold's popularity. <INT/RATE>
BONDS BUYBACKS HURT GOLD
One element of the rescue has pressured gold prices, however. The European Central Bank's commitment to buy euro zone government bonds has cut chances of defaults.
But analysts say risk aversion still dominates market psychology, noting that gold has moved up alongside the dollar. .DXY.
"I think we could easily see a new record high before the weekend," analyst Walter De Wet at Standard Bank said, referring to the spot gold price. "But also ...at these levels smaller than usual volumes could push prices higher."
Worries about the European rescue plan sent gold priced in euros and sterling to record highs. Gold priced in sterling rose to a record 848.97 pounds an ounce, while euro-priced gold touched an all-time high of 989.20 euros. <FRX/>
Strong investor interest in gold can be seen in the holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, which said its holdings stood at a record 1,209.499 tonnes as of May 12.
Spot silver was at $19.47 an ounce, from $19.48 on Wednesday, platinum was at $1,734 from $1,736.50 and palladium at $539 from $540.