Gold hovers above $1,200 after rally near record high

By Lewa Pardomuan

SINGAPORE (BestGrowthStock) – Gold edged down on Friday after rising just shy of an all-time high the previous day on Europe’s escalating debt woes and a tumble in U.S. stocks (Read more about the stock market today. ), but strong safe haven demand is likely to help the metal test new highs.

Gold has gained as much as 10 percent this year as investors spooked by potential contagion from the eurozone debt crisis rushed to buy to the precious metal, whose safe haven appeal tends to increase in times of economic and geopolitical crises.

Spot gold was at $1,202.35 an ounce at 0633 GMT, down $4.90 from New York’s notional close on Thursday, when it jumped 3 percent to its highest since December 2009 at $1,210.35 an ounce — marking its biggest one-day gain in more than a year.

Gold struck record at $1,226.10 five months ago.

Dealers expected volatile trade ahead, with investors waiting for U.S. nonfarm payrolls later on Friday which could give clues on the state of the economy.

“We could see the recent highs touched and broken in a blink of an eye in this kind of market. At the same time, we can easily see it backed down to $1,170 or something,” said Darren Heathcote, head of trading at Investec Australia in Sydney.

“Tonight, we’ve got the nonfarm payrolls which are the fundamentals and strong figures are expected which could be very very positive in terms of the global outlook. For the time being, I expect volatility.”

Gold priced in sterling hit record, while holdings in the world’s largest gold-backed ETF, SPDR Gold Trust, rose to another record of 1,185.787 tonnes as of May 6.

U.S. gold futures for June delivery added $3.1 an ounce to $1,200.40, having risen to a five-month high the previous day.

The Nikkei fell more than 4 percent on Friday after U.S. stocks (Read more about the stock market today. ) plunged as much as 9 percent on worries Europe’s debt crisis was spreading. U.S. stocks (Read more about the stock market today. ) had plunged in the last two hours of trading on Thursday in a suspected trading glitch before clawing back some of the losses. (.T: ) (.N: )

Europe equity funds saw more than $2 billion in net outflows in the week to May 5, the most in a year, with fears of a growing euro zone sovereign debt crisis spreading from Greece, EPFR Global said on Friday in a report.

The physical sector saw selling of gold bars from Indonesia and Thailand, while main consumer India was on the sidelines because of a weaker rupee against the dollar.

“Selling continues but the amount is not that much. It looks like fundamentals are still good. There’s no interest from India. I think they are running away,” said a dealer in Singapore.

The euro nursed chunky losses on Friday after news that finance ministers from Group of Seven nations will discuss debt-stricken Greece later in the day, while sterling hit a one-year low against the dollar on political uncertainty in Britain.

Stock Market Advice

(Editing by Ed Lane)

Gold hovers above $1,200 after rally near record high