Gold in Euros, Francs, Largest ETF Reach Records (Update1)

May 6 (Bloomberg) -- The price of gold in euros jumped to a record today as a slump in the currency prompted investors to buy bullion to preserve their wealth. Holdings in the biggest exchange-traded fund backed by bullion reached an all-time high.

Gold denominated in euro has advanced 20 percent this year as the 16-nation currency tumbled about 11 percent on concern that the region’s debt crisis may spread even as the European Union and International Monetary Fund agreed on a 110 billion euro ($143 billion) bailout package for Greece. It reached a record 921.2842 euros today and was last at 919.75.

Assets held by the SPDR Gold Trust rose 7 metric tons to 1,166 tons yesterday, according to figures on the company’s website. The trust is the world’s sixth-largest stockpile of the precious metal, behind France’s 2,435.4 tons, according to data from the producer-funded World Gold Council. The U.S. is the largest holder.

Investors are increasing bets that gold priced in euros will go higher, according to Gordon Cheung, a trader at Standard Merchant Bank (Asia) Ltd. “Safe-haven buying remains,” he said from Singapore today.

Gold for immediate delivery traded little changed at $1,173.80 an ounce at 2:26 p.m. in Singapore, just 4.3 percent short of its record in dollars of $1,226.56 reached Dec. 3. The metal has gained 7 percent this year and hit records in sterling and Swiss franc terms as investors sought a hedge against declining currencies. It extended gains in Swiss francs to a record 1,319.803 today.

Bear Market

The bear market is going to resume and gold is going to do “very, very well” in this next decline, according to David Tice, chief portfolio strategist for bear markets at Federated Investors Inc. “You will hold gold because it will protect you” against weakening currencies, he told Bloomberg Television in an interview today.

Investors also turned to gold as a store of value after global equities extended a rout. The MSCI World Index of stocks yesterday erased its 2010 gain after Moody’s Investors Service warned it may cut Portugal’s debt rating and three people were killed in an Athens fire set during protests against government austerity measures.

“This is a big issue that’s going to take time to sort out,” said Standard’s Cheung. “If the strength of euro-gold remains intact, at some point dollar-gold will benefit and challenge the $1,200 level.”

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net

Last Updated: May 6, 2010 03:56 EDT