January 26, 2009 / 11:07 AM / 11 years ago

PRECIOUS-Gold climbs above $900/oz in flight to safety

* Gold reaches highest since Oct 10 on safe haven demand * Gold hits record in euro, sterling terms * SPDR Gold Trust bullion holdings rise to all-time high (Updates prices, adds comment, adds Reuters poll detail)

By Jan Harvey

LONDON, Jan 26 (Reuters) - Gold climbed above $900 an ounce on Monday to its highest level in more than three months, as interest in bullion as a haven from risk spurred buying, and the dollar weakened against the euro.

Spot gold XAU= was at $903.15/904.75 an ounce at 1358 GMT, up from $898.10 in New York late on Friday. Earlier it peaked at $908.65, its firmest level since October 10.

U.S. gold futures for February delivery GCG9 on the COMEX division of the New York Mercantile Exchange were up $7.50 at $903.30.

Gold priced in euros XAUEUR=R reached an all-time high of 701.55 an ounce, and in sterling XAUGBP=R of 661.55 pounds, as fears over the global economic slowdown and volatility in other asset prices spurred buying. [ID:nLQ276434]

“Gold is rising on the fallout from the renewed banking crisis,” said VM Group analyst Matthew Turner. “The banking crisis is bad for share prices, and creates fear and panic. Some investors are thinking gold is the safest option.”

The dollar, weakness in which usually benefits gold, also softened against the euro on Monday as the single currency recovered from an earlier near six-week low against the U.S. unit. [ID:nLQ266271]

Gold was already benefiting from increased interest from investors seeking a haven from risk, amid fears over the deteriorating economic outlook.

An International Monetary Fund official said on Sunday that the IMF will cut its 2009 growth forecast again by between 1 percent and 1.5 percent as economic conditions weaken further. [nLP315410]

Against this backdrop, demand for physical gold both from investors in smaller products such as coins and bars and from exchange-traded funds remains firm.

Investors are seeking the safety of physical bullion as other asset prices met fresh volatility, analysts said.

“In times of economic crisis, falling equity markets and mounting aversion to risk, physical gold is preferred as the safest form of investment,” Commerzbank analyst Eugen Weinberg said.

POLL

Reuters’ biannual poll of analysts’ price forecasts showed most expect gold prices to hold their ground this year, though platinum, palladium and silver prices are seen falling. <PREC/POLL> COMMODITYPOLL15

The poll showed a median gold price forecast for this year of $862.50 an ounce, up 3.5 percent from the median 2009 forecast in Reuters’ last regular survey in July, and down only marginally on last year’s average price of $871.21 an ounce.

The world’s largest gold-backed ETF, New York’s SPDR Gold Trust (GLD), which issues securities backed by physical stocks of the precious metal, said its holdings rose 1.6 percent to an all-time high of 832.57 tonnes on Friday. [ID:nT293191]

The trust’s bullion holdings have climbed more than 52 tonnes or nearly 7 percent since the beginning of the year.

Among other precious metals, silver XAG= firmed in line with gold to $11.98/12.06 an ounce from $11.92.

Platinum XPT= edged down to $952/957 an ounce from $955.50 an ounce in New York late on Friday.

Reuters’ precious metals poll showed little consensus on the supply and demand balance for platinum in 2009, with forecasts ranging from a surplus of more than half a million ounces to a deficit of 140,000 ounces. [ID:nLQ249305]

Analysts disagree on how much demand will fall this year, and how far producers can scale back output in response to lower output.

Palladium XPD= eased to $191/196 an ounce from $195.00. (Editing by Peter Blackburn)

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