PRECIOUS-Gold sets new high as ECB renews bond buys

Thu Aug 4, 2011 9:47am EDT

* Gold hits records in euro, yen, sterling, dollar

* Trichet says bond buying programme ongoing

* Platinum down after Imapala raises wage offer

By Melanie Burton

LONDON, Aug 4(Reuters) - Spot gold prices set yet another new record high on Thursday after the European Central Bank President Jean-Claude Trichet said the bank would continue to buy bonds in response to a deepening euro zone debt crisis.

Gold hit a record $1,678.31 an ounce and also made fresh records in euro , sterling and yen , up from 1,660.70 an ounce late on Wednesday in New York.

"Trichet has admitted the fact that the recovery is not going as expected ,that the economic outlook is more down beat than before and that they have to extend the deposit facilities, meaning we're going to have weaker currency yields," analyst Andrey Kryuchenkov of VTB Capital said.

"When currencies are not performing as well as you want them to, gold is the place to put your money."

The European Central Bank will offer a round of six-month liquidity to banks in response to a worsening euro zone debt crisis, its head Jean-Claude Trichet said on Thursday.

Yen intervention overnight and the prospect of further Swiss money market measures to stem franc appreciation were also positives for gold.

As central banks move to weaken the two safe-haven currencies, they boost gold's relative appeal as an asset that retains value in times of monetary depreciation, analysts said.

Japan sold 1 trillion yen ($12.6 billion) and its central bank eased monetary policy, joining Switzerland in efforts to tame currencies buoyed by safe-haven demand from investors fretting about the health of the global economy.

"The potential for additional safe-haven flows stemming from central bank interventions in FX (foreign exchange) markets adds a significant new dimension to our positive outlook for gold," said UBS in a research note.

"Without doubt, it gives further weight to holding real hard assets over paper assets."

U.S. jobs data on Friday could illuminate further its road to recovery, Matthew Turner of Mitsubishi Corp said.

"With the budget deal in the U.S. now done, the focus has shifted to the economy. Last week the economic data were really bad, which has raised expectations of more quantitative easing," Turner said.

SPDR HOLDINGS UP

Investors continue to add to long holdings of gold and silver, given concerns Europe and the United States may tip back into recession.

Holdings of the largest gold-backed exchange-traded-fund (ETF), New York's SPDR Gold Trust and that of the largest silver-backed ETF, New York's iShares Silver Trust rose 0.4 percent on Wednesday from Tuesday.

Platinum and palladium fell on prospects of a prolonged soft period of global growth and a conciliatory tone to salary negotiations in South Africa. But gold's rally helped the metals to stem losses.

Platinum has seen steady liquidation following news that Impala Platinum had improved its wage offer to avert a strike, which was speeded by technical selling, analysts said.

"South Africa was probably the trigger, but this clearly shows how the small markets struggle when corrections set in. (The fall) has taken out some technical levels so the sell button has been dusted down," analyst Ole Hansen of Saxo Bank said.

Platinum traded at $1,749.49 an ounce, down 1.5 percent from $1,776.50. Palladium traded at $780.22 from $790.95.

South Africa's National Union of Mineworkers said on Thursday that Impala Platinum had improved its wage offer in a bid to avert a strike that could impact production at the world's second-largest producer of the precious metal.

For a factbox on strikes in South Africa.

Silver rallied to $41.98 an ounce from $41.68 late in New York on Wednesday. It earlier hit its highest since early May at $42.17. (editing by Richard Mably)

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