(Updates prices, adds comment)
* Gold hits record in dollars, euro, sterling
* ETF holdings hit all-time highs
* Coming up: FOMC policy decision; 1815 GMT
By Amanda Cooper
LONDON, Aug 9 Gold hit a record high on Tuesday
in its biggest three-day rally since the depths of the financial
crisis in 2008, as investor fears over the threat to the global
economy from the European and U.S. debt crises hit assets seen
as higher risk.
Though spot prices retreated from highs as stock
markets opened higher in the United States, they remained up 1.4
percent on the day at $1,739.60 an ounce at 1342 GMT, having
earlier peaked at $1,778.29.
"The short run uptrend is intact," said VTB Capital analyst
Andrey Kryuchenkov. "Panic dominates for now and even though we
have rebounded a bit on the broader market, people will still
fear liquidating substantial gold longs."
Gold has risen by about 7 percent this month, driven by
flows of cash out of equities, bonds and currencies, after the
United States lost its top-notch credit rating.
Investors have lost confidence in the ability of European
leaders to stem the spread of the debt crisis that has now
engulfed the euro zone's third- and fourth-largest economies,
Italy and Spain.
European stocks lost over 5 percent in early trade,
higher-yielding currencies slid, German government bonds and the
Swiss franc rallied as investors ditched anything perceived to
"The market could come off from here, but it's headed in a
northerly direction," said ANZ head of metal sales Peter
Hillyard earlier. "From where we are now, you might think we
could see some sort of pull-back. But I'm talking about a
momentary thing, a pull-back like the loading of a gun, which
then fires away."
Reflecting the rush into gold, holdings of metal in
exchange-traded funds rose for a twelfth day to an all-time high
near 70 million ounces, equivalent about half of total supply in
2010, based on World Gold Council data.
ECB BUYS BONDS
The European Central Bank bought Italian and Spanish bonds
on Monday to try to stem the spread of the region's debt crisis,
but in doing so found itself locked in full-blown conflict with
the German central bank.
The euro took heart from the ECB's efforts, rallying
0.6 percent against the dollar, but held near record lows
against the safe-haven Swiss franc .
Gold priced in euros hit an all-time peak above
1,250 euros an ounce and was set for its biggest two-day rally
since May 2010, when the euro zone debt crisis first flared.
Gold in sterling and yen also hit records.
Global equities recovered early losses to
trade up 0.5 percent in midafternoon trade, as U.S. equity
markets opened higher. However, they have still fallen by 13.3
percent so far in August and are set for their worst monthly
performance since late 2008.
Gold's upward progress has attracted some profit-taking from
investors who have scrambled to plug holes in their portfolio
from the rout across the stock markets.
Top asset manager BlackRock will use profits it is
making in gold and bond markets to seek out bargains in falling
global equity markets, James Holt, investment strategist at the
world's largest money manager, said on Tuesday.
However, analysts said that the current push into gold
appeared to be fairly solid.
"The ingredients are all in place for a stronger gold price,
as the metal is not subject to the risk of intervention or
quantitative easing," said UBS in a note.
"This doesn't mean that pullbacks won't occur, and though
some of these may be severe, we believe dips will be bought.
Comex net longs may be at record levels, but current gold buying
is very broad-based, with a strong physical bias which provides
much support," it added.
Elsewhere silver fell 2.8 percent on the day to
$37.87 an ounce, pushing the gold/silver ratio to 46.0, a
six-month high in the outperformance of gold versus silver.
Platinum rose 1.5 percent to $1,738 an ounce, while
palladium rose 2.3 percent to $731.47.
Of vital importance to markets later in the day will be the
outcome of the meeting of the U.S. Federal Reserve's
policy-setting committee, which many hope will signal its
intention to support the economy and restore some stability to
(Addotional reporting by Jan Harvey; editing by Keiron
Henderson; Editing by Alison Birrane)