Gold at 6-week high on global market turmoil

Gold rose to the highest in six weeks in London on signs that turmoil in credit markets is spurring some investors to seek a haven in the precious metal.

Investment in StreetTracks Gold Trust, the biggest exchange-traded fund backed by the metal, climbed 2.5 per cent to a record 528.36 tonnes yesterday, figures from the London-based World Gold Council show.

The European Central Bank on Thursday lent emergency cash to banks for the fifth time in a month, a day after the Bank of England injected funds to reduce the cost of credit.

"It seems the gold market is ready to go higher,'' said Gerry Schubert, a director of metals at Fortis Bank in London. "The whole upset in the financial markets will ultimately lead to gold strengthening its status as a safe haven.''

Gold for immediate delivery gained $2.76, or 0.4 per cent, to $684.32 an ounce as of 12:16 pm in London, after earlier on Thursday gaining to $685.43, the highest since July 24.

US and European stocks fell on speculation a rout in the credit markets will erode corporate earnings. Manufacturing orders in Germany, Europe's biggest economy, dropped the most in at least 16 years in July, the government said on Thursday, as interest rates at a six-year high restrain borrowing for investment.

Some investors may buy gold on anticipation central banks in Europe will sell less than the 500 tonnes that they restricted themselves to for the 12 months through September 26, Schubert said.

Central bank sales were about 100 tonnes below the limit as of August 28, according to World Gold Council estimates.