Singapore - Gold gained on Wednesday, heading for its seventh quarterly rise and its biggest increase since the end of 2007, after holdings in the world's largest bullion-backed ETF hit a record as investors rushed for safety from tumbling stock markets.
The Nikkei dropped more than 2% after Wall Street tumbled in a sell-off triggered by a rising wave of alarm over the outlook for the global economy.
Spot gold rose $3.30 to $1 241.30 an ounce after volatile trade on Tuesday, when it dropped toward $1 220 before bouncing to around $1 241.
Gold has struck a series of record highs this year, most recently last week, just below $1 265, propelled by worries the sovereign debt crisis in Europe could spread and fears the US economy is slowing.
Those fears have also sent the euro towards record lows versus safe havens such as the Swiss franc and the dollar, partially undermining bullion's appeal.
"There's some uncertainty in the near future, causing the market to push up a little bit. There's some safe haven buying," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.
"We can say we will trade between $1 225 and $1 265 for sometime. We need the investment funds to push it up."
US gold futures for August delivery were steady at $1 242.7 an ounce. The contract hit an all-time high at $1 266.50 last Monday.
The world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings rose to a record 1 320.436 tonnes by June 29 from 1 316.177 tonnes on June 24, with a total value of around $52bn.
"SPDR Gold Trust has radically transformed the way in which a wide range of investors access the gold market," said James Ross, senior managing director at State Street Global Advisors, which runs GLD.
"SPDR Gold Trust is increasingly being used as part of a long-term diversification investment strategy within investors' portfolios in a variety of market cycles currently playing out worldwide," Ross said in a statement as assets exceed $50bn.
Global financial markets also face pressure after data showed a fall in US consumer confidence, a downward revision to China's leading indicators index and an unexpected rise in Japanese unemployment.
"There's selling pressure in stock markets and other commodities, but we've seen a little bit of safe haven buying in gold. I think we have a good support around $1 225 and $1 228," said a dealer in Hong Kong, referring to previous lows.
"If we trade above $1 250 again, we have another chance to hit a record high."
Silver was steady while palladium and platinum tracked industrial metals and equities lower.
The MSCI index of Asia Pacific shares outside Japan dropped 1%, tracking a 2.65% slide in the Dow Jones industrial average and an over 3% drop in the S&P 500 Index.
Shanghai copper fell more than 2% on Wednesday after London prices tumbled the following day as worries about the global economic outlook recovery hit the market.
- Reuters