PRECIOUS - Gold flat but euro, currency volatility support

NEW YORK/LONDON Wed May 19, 2010 6:24am IST

Gold bars are displayed at a gold jewellery shop in Chandigarh November 4, 2009. Gold prices ended unchanged on Tuesday, supported by safe-haven buying due to volatility in the euro market. REUTERS/Ajay Verma/Files

Gold bars are displayed at a gold jewellery shop in Chandigarh November 4, 2009. Gold prices ended unchanged on Tuesday, supported by safe-haven buying due to volatility in the euro market.

Credit: Reuters/Ajay Verma/Files

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NEW YORK/LONDON (Reuters) - Gold prices ended unchanged on Tuesday, supported by safe-haven buying due to volatility in the euro market.

After trading mostly lower in early activity due to hopes that a European rescue to resolve the region's debt crisis would work, gold rebounded as the euro tumbled to a four-year low at under $1.22 per ounce.

Platinum and silver, which have a strong industrial demand component, rebounded after the previous session's sharp declines. Worries that austerity steps in the euro zone could hamper growth, however, pressured prices, analysts said.

Investors' interest in the metal remained piqued by the prospect of sovereign debt risks spreading beyond the euro zone.

"The fact that Greece has actually received some of the aid package has probably taken some heat out of the market, but we still have to see if the aid is a cure, or just a temporary sticking plaster (bandage)," said Societe Generale analyst David Wilson.

Spot gold was at $1,220.85 an ounce at 3:25 p.m. EDT (1925 GMT), against $1,223.00 late in New York on Monday.

U.S. gold futures for June delivery on the COMEX division of the NYMEX settled down $13.50 at $1,214.60 an ounce.

COMEX open interest rose almost 15,000 lots to an all-time high above 600,000 lots as of May 17, indicating rising volatility as prices held near record highs, traders said.

Contagion fears about Greece's debt crisis drove gold to a record $1,248.95 an ounce last week and knocked other assets lower.

Independent investor Dennis Gartman said he was abandoning his long-held strategy of buying gold relative to non-U.S. currencies, such as the euro, due to rising volatility in the metal and currency markets.

Earlier in the session, investors were cheered by news that aid for Greece was arriving as planned, after officials said the country received a 14.5 billion euro emergency loan from the EU and would use some of the money to repay an 8.5 billion euro bond.

ETF INVESTMENT FIRM

Investment demand for gold remained high, with holdings of the world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, rising just over three tonnes on Monday to a record 1,217.108 tonnes.

Among other precious metals, silver was at $18.96 from $18.75 an ounce. Platinum was at $1,665 an ounce against $1,666, and palladium was at $495.50 against $504.

London's Platinum Week entered its second day on Tuesday, with analysts, traders, refiners and recyclers meeting in the British city to discuss industry developments.

Refiner Johnson Matthey initiated proceedings on Monday with the release of its Platinum 2010 report, in which it said it expected the market to move closer to balance this year after swinging into a surplus of 285,000 ounces last year.

For a graphic showing Johnson Matthey's evaluation of platinum market's supply and demand fundamentals, click link.reuters.com/cyn84k

Platinum and palladium encountered heavy selling on Monday, along with other industrial metals, led by copper's 6 percent fall, but have since regained some lost ground.

Close Change Pct 2009 YTD

Chg Close % Chg

US gold 1214.60 -13.5 -1.1 1096.20 10.8

US silver 18.879 0.020 0.1 16.845 12.1

US platinum 1690.50 27.30 1.6 1471.00 14.9

US palladium 507.00 3.40 0.7 408.85 24.0

Prices at 3:32 p.m. EDT (1932 GMT)

Gold 1222.15 -0.85 -0.1 1096.35 11.5

Silver 18.95 0.20 1.1 16.84 12.5

Platinum 1665.50 -0.50 0.0 1465.50 13.6

Palladium 495.50 -8.500 -1.7 405.50 22.2

Gold Fix 1216.75 1.75 0.1 1104 10.2

Silver Fix 18.82 -29.00 -1.5 16.99 10.8

Platinum Fix 1681.00 6.00 0.4 1466 14.7

Palladium Fix 507.00 4.00 0.8 402 26.1

(Editing by Marguerita Choy)

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