LONDON (Reuters) - Gold surged to a record high on Wednesday as investors piled in, seeking safety from turmoil in government bond markets and the risks of Greece's debt crisis spreading to other countries.
Spot gold hit $1,243.55 an ounce, a gain of nearly 20 percent since early February. It was bid at $1,240.75 an ounce at 1006 GMT from $1,232.05 late in New York on Tuesday. U.S. gold futures hit a record $1,244.80 an ounce.
Investor buying this week was triggered by doubts that a $1 trillion rescue package to contain an escalating debt crisis in Europe would be enough to cut the chances of sovereign default in the euro zone.
"Safe-haven flows are going to continue for the time being, people are digesting news about the package," said Dan Smith, analyst at Standard Chartered. "This is something of a wake-up call in terms of how safe sovereign debt really is."
Investors and many traders think the scale of Greece's fiscal problems could make it tempting for the country to default, despite the package, which could start a run on the debt of countries such as Spain, Portugal and Italy.
That was partly offset by news that European central banks were buying Portuguese, Irish and Greek government bonds, but investors and analysts are not convinced.
"Gold is benefiting as euro zone government bonds lose some of their safe-haven appeal. With governments tightening budgets, it will take the pressure off central banks to hike," said David Thurtell, analyst at Citi.
"With interest rates around the world set to stay relatively low, the opportunity cost of investing in gold will remain low."
TOO MUCH UNCERTAINTY
Gold priced in sterling hit a record of 833.49 pounds and in Swiss francs it hit an all-time high of 1,381.16 francs.
The scale of investor buying can be seen in the holdings of the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, which said its holdings stood at a record high of 1,192.150 tonnes as of May 10.
