Gold could touch new peak amidst concerns on European banks

It is just $10 from setting a new high, Lee Suk Jin, a commodities analyst at Tong Yang Securities Inc, told Bloomberg News. He also said that there is a strong chance the gold will break the record, but can't predict when.

Immediate-delivery bullion shot up by $1.25 to reach $1,251.30 an ounce, which was about 1.1 percent lower than the peak ($1,265.30) hit in June. Gold scheduled for delivery in December fluctuated little, trading at $1,251.20 on the Comex in New York. Floor trading at Comex remained closed for the Labor Day holiday.

Meanwhile, the Euro declined against all 16 of its counterparts after the Association of German Banks said the country's 10 biggest banks, including Deutsche Bank AG, could need an additional capital of about $134 billion (105 billion euros) as a result of new regulations. Fears were also raised when The Wall Street Journal reported the recent "stress tests" on the strength of some of Europe's major banks had understated potentially risky government debt held by some lenders.

Worries with respect to raising funds by governments and banks in Europe are likely to persist, Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd -- Japan's largest currency broker - said.

Annual Gain

Investors in Europe looking to shield their wealth from the financial turmoil and predictions of slow economic growth are set to push the bullion for the 10^th annual gain. The record high was created in June when investors feared that some of the European banks had very high levels of sovereign-debt, and unless the government issued new debt there was a strong risk of default.

From a record holding of 1,320.44 tons in June, the holdings in SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, came down by 0.47 metric ton to 1,294.44 tons as on September 3, the company's website said.

The most precise forecaster of gold, UniCredit SpA's Jochen Hitzfeld has increased his estimate for the average price next year to $1,400 an ounce (a rise of 12 percent) on account of strong demand from China. The average price would reach $1,600 an ounce in 2012, Hitzfeld, based in Munich, predicted in a report.

Meanwhile, silver for immediate-delivery traded at $19.8213 an ounce after touching $19.9438, which was its peak since March 2008. At $1,562.38 an ounce, there was little change in Platinum. Palladium rose 0.2 percent to $528.13 an ounce.