Gold stays firm as safety bid in euro debt crisis

NEW YORK (Reuters) - Gold prices were modestly higher by late Thursday trade, having risen earlier to a one-week high, supported by the metal’s safe-haven appeal as concerns linger over the euro zone credit crisis, but global equity market rallies and the euro’s bounce capped the rise.

Spot gold was higher at $1,212.10 an ounce by 2 p.m. EDT (1800 GMT) than $1,209.90 in late New York trade on Wednesday. The precious metal has risen about 3 percent this week, hitting $1,218.35 on Thursday, its highest level since May 19.

Benchmark U.S. gold futures for June delivery on the COMEX division of the New York Mercantile Exchange finished $1.50 lower at $1,211.90 an ounce, after earlier reaching an 8-day high at $1,218.50.

June gold was in range as rollovers out of the contract into later-dated issues dominated COMEX gold trade. First notice day for June futures is May 28. Anyone still holding June contracts on Friday will risk taking delivery of the yellow metal.

Instead, most players were rolling gold futures positions into August contracts, with some moving into December.

COMEX August gold fell 90 cents to end at $1,214.40.

Jonathan Jossen, independent COMEX trader representing several large hedge funds, said he saw gold resuming its upward trend once the rollover period had run its course.

“Since you have players on both sides of the market, it keeps the price in place. So, we’re in a tight range, but once the roll is over, I think we’re going back up,” said Jossen.

He noted that in August’s run from last Friday’s low at $1,168 to the session high at $1,220.6 a number of fund investors “bought thousands and thousands of call spreads. We have a lot of very bullish trades going on. I’m very bullish.”

Jossen added that an August futures weekly chart showed a support level at $1,206 held in a cup and handle formation, which he deemed “a very bullish formation when it works.”

“If it holds, I’d say we’re going up to $1,228,” he said.

Investors have taken refuge in bullion in recent weeks, favoring its safe-heaven appeal and ditching the euro on fears the euro zone debt crisis could deepen. Gold hit a record high of $1,248.95 in mid-May.

“It looks quite solid, the rally in gold,” said Deutsche Bank’s head of commodity research, Michael Lewis.

“We still feel market disruption risk is something we’re going to see quite frequently now over the next year. There are a number of factors we would highlight as risks, which could be quite beneficial for gold,” he added.

Putting a leash on gold’s gains were rallies in share prices and the euro, which rose 0.7 percent versus the dollar, when investors risk tolerance grew after China and Kuwait denied reports they would reduce euro zone investments.

Bullion dropped to a two-week low last week as investors sold the metal to cover losses in equities, but analysts said the subsequent recovery showed sentiment was still bullish.

Underpinning gold was data showing the U.S. economy in the first quarter grew at a slower pace than previously estimated.


Also supportive to gold, the world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust, said its holdings totaled 1,267.626 tonnes as of May 26, up from 1,267.322 tonnes a day earlier, setting a fresh record.

The World Gold Council said global gold demand would likely rebound this year as investors buy the metal as a safe store of value away from volatile financial markets and as consumers get used to higher prices.

Palladium rose to $460.50 against $436.50. Platinum advanced to $1,556.0 an ounce against $1,518.50. Spot silver was well up at $18.43 an ounce from $18.01 previously.

Additional reporting by Rebekah Curtis; Editing by Walter Bagley