Gold rises for sixth day on euro zone fears

Gold bars are seen in this picture illustration taken at the Czech National Bank in Prague January 31, 2011.

NEW YORK (Reuters) - Gold rose on Monday, ending at its highest point since setting a record in May, as investors sprinted for safer havens on mounting worries that the euro zone debt crisis might spill into Italy.

Bullion rallied for a sixth day of gains, shaking off some midday selling as traders opted to focus on its safe-haven appeal rather than lump it in with other commodities which were caught in a sell-off across risk assets. Gold also hit record highs in both euro and sterling terms.

Silver notched its biggest one-day loss in a week, hurt by fears that investors cut their exposure to Italian government bonds due to fears that the country could be the next after Greece to get dragged into the crisis.

The S&P 500 fell 2 percent.

Gold is used as a safe haven in times of global economic uncertainty. At times, however, the metal is seen as a risk asset moving in tandem with equities and commodities.

"I think the sovereign debt crisis in Europe is going to be with us for some time. It will attract interest in gold and will hurt other commodities because some of these factors in Europe will be so dire," said Bill O'Neill, partner of commodities investment firm LOGIC Advisor.

Spot gold was up 0.4 percent at $1,550.10 an ounce by 2:42 p.m. EDT. Earlier in the session, it hit a low of $1,541.40 an ounce as its latest run toward May's record high ran into heavy technical selling pressure near its three-week high of $1,557.75 an ounce.

U.S. gold August futures settled up $7.60 at $1,549.20 an ounce, after trading between $1,542.10 and $1,557.60.

COMEX futures open interest rose 2 percent to near 510,000 lots on Friday, helped by interest by overseas investors in the December contract, traders said.

(Graphic: r.reuters.com/dac62s)

Silver fell 2.5 percent to $35.74 an ounce, taking a beating along with other industrial commodities, as investors opted for safe havens such as U.S. Treasuries. The dollar index gained over 1 percent.

Global stocks and the euro sank on worsening worries over Italy, which has the highest sovereign debt ratio relative to GDP in the euro zone after Greece. Problems in Italy come amid efforts to help Greece with its debt problems.

GOLD IN EUROS, STERLING HIT RECORDS

A lack of investor confidence in the euro zone lifted the price of bullion priced in euros and sterling to record highs earlier on Monday.

Euro-denominated gold hit record highs above 1,110.48 euros an ounce, while sterling-priced gold rose for a sixth day to a record 979.89 pounds an ounce.

EU finance officials discussed options for resolving Greece's intractable debt crisis on Monday, galvanized by the growing threat of contagion to Italy, the euro zone's third-largest economy.

"If we start to see more pressure on Italy, such as talk of debt default, gold will look to test the previous high," said Darren Heathcote, head of trading at Investec Australia.

Also underpinning gold is uncertainty over a deal to preserve the top-notch debt rating of the United States.

U.S. President Barack Obama on Monday increased pressure on Republican lawmakers to make concessions for a deal to avoid an August 2 debt default and said both sides must "pull off the Band-aid" and make sacrifices.

Platinum and palladium were both lower on the day. Platinum was down 0.8 percent at $1,718.95 an ounce, while palladium fell 1.2 percent at $763.18.

(Additional reporting by Amanda Cooper in London, Rujun Shen in Singapore; editing by Jim Marshall)