Gold Continues Up On Heels of Volatile Market

(Reuters) Gold rallied to less than $10 below its all-time high Monday, as funds piled in for safety in the wake of weaker equity markets due to ongoing fears about euro zone credit contamination.

Silver also posted its highest gain in a month as short-term traders bought the metal on gold's coattail, while platinum group metals retreated on concerns that stagnant growth in Europe could hurt autocatalyst demand.
In earlier sessions, gold had traded as low as $1,210.15 an ounce as initial gains in the U.S. stock markets dented safe-haven demand.

The metal, however, later hit a three-week high of $1,239.25 as equity markets turned lower and as the euro EUR=X 1.1934 -0.0009 (-0.08%) hovered near a four-year low against the dollar on lingering credit fears.

"It's a combination of short-covering and more concern about the European debt crisis," said Bruce Dunn, vice president of trading at New Jersey-based Auramet Trading. "It's just a safe-haven play. In euro terms, gold keeps on making new highs."

Spot gold remained around XAU=X 1240.05 22.05 (+1.81%) $1,239 an ounce midday Monday, against $1,218.00 late in New York Friday.

"This morning, day traders took a view that we would probably see gold down below $1,200, where they could run a few stops and pick it up cheaper," said Peter Hillyard, head of metals sales at ANZ Bank. "I think they got caught."

"The market is on a longer-term and sustainable uptrend," he added. "If you detach yourself from the minute by minute, this market is heading higher."

Gold has been lifted by volatility in the wider financial markets this year, benefiting particularly from fears over euro zone sovereign debt levels, which have battered the euro.

Gold continues to move inversely to the stock market, and as long as the market remains volatile gold should thrive. However, at record high levels of $1240/oz, the price seems a bit too high to buy in.