LONDON

Jan Harvey
RTGAM



LONDON - Gold held near its highest since mid-November on Monday as speculation U.S. authorities will have to further extend monetary easing and concerns over euro zone debt boosted interest in the metal as a haven from risk.

While strength in the U.S. unit kept a lid on gains in dollar-priced gold, gold priced in sterling hit record highs and Japanese yen-denominated bullion reached its highest since early 1983 as risk aversion stoked broad-based gains in the metal.

Spot gold was bid at $1,414.05 (U.S.) an ounce at 1211 GMT, against $1,414.35 late in New York on Friday. U.S. gold futures for December delivery rose $6.80 an ounce to $1,412.20.

Sterling-priced gold reached a record 902.47 pounds ($1,414) an ounce, while gold denominated in yen hit its highest since Feb. 1983 at 117,541 yen ($1,418) an ounce.

Fresh concerns emerged over the stability of the foreign exchange markets after Federal Reserve Chair Ben Bernanke said on Sunday the bank could buy more than the $600-billion in U.S. government bonds it has committed to purchase.

If the Fed extends its quantitative easing policy, further undermining the dollar, it could lead to fresh buying of gold as an alternative to fiat currencies. This added to the momentum gold picked up last week on worries over euro zone debt levels.

"Bernanke...talked about QE3, and that is fuelling safe-haven demand," said Credit Agricole analyst Robin Bhar. "The euro zone crisis hasn't gone away. We may hear more on that with the eurogroup meeting today in Brussels.

"With all these broader-based fears about currency debasement and the U.S. doing more money printing... gold, like Treasuries, like the dollar from time to time, will be the beneficiary of those safe-haven flows."

The U.S. dollar later rebounded to trade nearly 1 per cent up on the euro as the single currency was battered by debt concerns ahead of a euro zone finance ministers' meeting.

While strength in the dollar is limiting spot gold's gains for the moment, concerns over the outlook for both currencies are keeping the precious metal firmly underpinned.

"While lingering concerns over euro zone debt issues maintain safe-haven buying, the potential for a longer than expected period of expansionary monetary policy in the U.S. and Europe is prolonging the precious metals bull market," said Morgan Stanley in a note.

EUROGROUP MEETING EYED

All eyes are now on the outcome of Monday's meeting of euro zone finance ministers in Brussels. They face pressure to increase the size of a 750-billion euro ($995-billion) billion) safety net for debt-stricken members.

Trading of sovereign bonds from countries such as Portugal and Spain was subdued pending the outcome of the meeting, with the region's debt crisis still occupying centre stage.

On the investment side of the gold market, the world's largest gold-backed exchange-traded fund, SPDR Gold Trust , said its holdings fell to 1,298.030 tonnes on Friday.

Among other precious metals, silver rose to a 30-year high at $29.90 an ounce early on Monday, and was later at $29.74 an ounce against $29.36 late on Friday.

Net long positions in U.S. silver futures held by speculators rose by 12 per cent in the week ended Nov. 30, as momentum traders jumped back into the market.

Platinum was at $1,715.74 an ounce against $1,725.50, while palladium was at $754.47 against $758.40. Palladium prices have benefited from firm ETF buying in recent weeks, analysts said.

"ETF buying of 150,000 ounces in the first three days of December alone means that monthly inflows are already the highest since the 339,000 ounce record set in January," said UBS analyst Edel Tully in a note.