* Bullion hits March high on worries of Europe contagion
* India leaves gold import duty at record high
(Updates with trader's comment on more upside for gold)
By Barani Krishnan and Clara Denina
NEW YORK/LONDON, July 10 Gold surged to 3-1/2
month highs on safe-haven buying on Thursday after questions
raised about the health of Portugal's top-listed bank sparked
worry that a new euro zone banking crisis might be in the
The scrutiny over Portugal's Banco Espirito Santo
turned financial markets risk averse, with stocks on both Wall
Street and in Europe ending lower. The yen, another safe-haven
like gold, hit multimonth highs. MKTS/GLOB]
"We did have a strong gold rally during the last period of
sovereign risk in Europe, so it's not surprising to see the
market reacting like this," said James Steel, metals analyst and
senior vice-president at HSBC in New York.
"But to be fair, gold has been trending higher for a while
now and there aren't too many sellers to stand in the way with
the geopolitical crises of the Middle East and Europe and the
Fed's insistence that higher U.S. rates are still way off."
At 5:00 p.m. EDT (2100 GMT), the spot price of bullion
was up 0.7 percent at $1,334.91 an ounce, after racing
earlier to $1,345.00, its highest since March 19. Gold technical
analysts said the rally was aided partly by a breakthrough of
strong chart resistance at $1,334.
U.S. gold futures most active contract, for August
delivery, settled up 1.1 percent at $1,339.20 an ounce.
Some traders saw more upside for the market.
"I think the path of least resistance for gold is upward,
toward the mid $1,400 level," said Adam Sarhan at New York's
Espirito Santo Financial Group, the largest
shareholder in Portugal's Banco Espirito Santo, suspended
trading in its shares and bonds, citing "material difficulties"
at parent company ESI. It was the first significant episode of
contagion for European peripheral markets this year, and it
curbed demand at Greece's second debt sale following its 2012
Gold also gained support from India's decision to keep the
import duty on gold unchanged at a record 10 percent in its
budget on Thursday. India's most-traded August gold contract
rose as much as 3 percent on speculation that Indian jewellers,
who were on the sidelines expecting a duty cut, will re-stock
after the government's decision.
Other precious metals jumped too, with platinum group metals
setting multimonth highs.
Platinum, boosted lately by more demand for the
autocatalyst metal from carmakers and also by supply problems in
major producer South Africa, was up 0.8 percent at $1,508 an
ounce. It touched $1,518.25 earlier, a high since Sept. 4.
Palladium was up 0.1 percent at $869.20 an ounce,
rising for a 14th session in a row. The sister metal to platinum
peaked earlier at $875.60, the highest since February 2001.
(Additional reporting by A. Ananthalakshmi in Singapore;
Editing by Keiron Henderson, Jane Baird, Marguerita Choy,
Andrew Hay and Peter Galloway)