Gold tops $1,205 mark as share sell-off sparks safe-haven buying

By Sethuraman N R

BENGALURU (Reuters) - Gold rose more than 1 percent to near three-week highs on Thursday, climbing above $1,200 per ounce as sliding global stock markets prompted risk-wary investors to seek out the metal, with a weaker dollar also supporting prices.

Spot gold gained 1.3 percent to $1,209.30 an ounce by 1457 GMT, having hit its highest since Sept. 21, at $1,210.34. U.S. gold futures added 1.4 percent to $1,210 an ounce.

European stocks fell in line with a slump on Wall Street, pointing to growing risk aversion across global markets. [MKTS/GLOB]

"Gold is finding a bit of support from the global sell-off seen in equities. If this (sell-off) persists, we will start seeing more of a move to gold as a safe-haven asset," ING analyst Warren Patterson said.

"Rising U.S. yields and general strength in the dollar have meant that investors have largely ignored gold. But people are seeing fairly good value at current levels on the back of some macro concerns."

Wednesday's dive on Wall Street prompted U.S. President Donald Trump to lash out against the U.S. Federal Reserve for raising interest rates.

The Fed increased rates last month for the third time this year and is widely expected to hike again in December.

Gold has fallen more than 12 percent since hitting a peak in April, with investors increasingly switching to the safety of the greenback as the U.S.-China trade war unfolded against a backdrop of rising U.S. interest rates.

But prices have managed to stay above a 1-1/2-year low of $1,059.96 hit mid-August, propped up by limited safe-haven buying at lower levels linked to concerns over economic growth and inflationary pressure from soaring oil prices. [O/R]

Peter Hug, global trading director at Kitco Metals, said that a break above $1,208 could trigger more buying.

"The weakness in the dollar and to some extent the fear in the equity carnage have spooked the shorts."

Holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 1.21 percent to 738.99 tonnes on Wednesday, the first gain in holdings since July and the biggest inflow since March.

Spot silver rose 1.4 percent to $14.43 an ounce, while palladium was up 1.7 percent at $1,085. Platinum edged up 0.6 percent to $824.10 an ounce.

(Reporting by Nallur Sethuraman and Arpan Varghese in Bengaluru; Editing by Jan Harvey and Adrian Croft)