Gold briefly rises above $1,200

NEW YORK (Reuters) - Gold rose briefly above $1,200 an ounce on Thursday as strong U.S. corporate earnings fueled a cross-asset rally, and lingering sovereign credit risk should provide underlying support to the metal.

Gold climbed as the Dow Jones industrial average rallied 200 points after bellwether U.S. companies reported strong revenues, easing worries about future growth. Crude oil and the Reuters/Jefferies CRB index .CRB also jumped.

Gold, viewed as a safe haven during times of economic uncertainty, had seen limited gains earlier this week as financial markets anticipated that most euro zone banks would pass stress tests on Friday.

“The better European data really seems to change psychology, and the excellent earnings numbers have created amore positive economic outlook that is supportive of gold,” said Bill O’Neill, partner of New Jersey-based commodities firm LOGIC Advisors.

Gold has been largely moving in tandem with the equity markets since early June, as the euro rallied on dissipating fears about a European debt contagion. (Graphic: )

Spot gold was at $1,195.55 an ounce at 2:39 p.m. EDT (1839 GMT), up from $1,191.80 late in New York on Wednesday. U.S. gold futures for August delivery settled up $3.80 at $1,195.60 an ounce.

Gold traders are now closely monitoring Friday’s stress test, which will disclose holdings of doubtful government debt owned by European banks.

“There is no apparent trigger for gold to move higher at the moment, especially with the situation in Europe a bit more under control,” said Bank of America-Merrill Lynch analyst Michael Widmer. “Against that backdrop, we have been drifting.”

He said if bank stress test results reassure the market, “it would have a more positive impact on the cyclical metals like the base metals, and a less positive impact on gold.”

Gold rose above $1,200 an ounce in early trade but quickly slipped back below that level, after data showed sales of previously owned U.S. homes hit a three-month low in June and weekly jobless claims surged.

U.S. stocks still jumped more than 2 percent based on upbeat earnings, following Wednesday’s tumble after Federal Reserve Chairman Ben Bernanke said that the U.S. economy faces “unusually uncertain” prospects.

Rising equities and better-than-expected European data lifted appetite for risk, weighing on the dollar, which fell 1 percent against a basket of currencies .DXY.