US gold rises 1pct on fears of Greek default

US gold futures jumped 1 per cent on Tuesday as investors dumped equities and turned to bullion on growing fears that a Greek default could trigger another global recession.

As safe-haven buying lifted gold prices, stocks in Asia extended losses on doubts over Greece's ability to avoid default, copper fell for a fifth day and Brent crude fell more than a dollar to below $101 a barrel.

Credit Suisse raised its 2012 gold price forecast to $1,850 from its prior forecast of $1,540, saying the clear beneficiary of the uncertainty and dislocations in financial markets has further upside with the crises set to continue.

US gold futures added $10 to $1,667.7 an ounce by 0304 GMT, having hit a high of $1,674.4 an ounce. Spot gold rose $8.99 at $1,665.39 an ounce - well below a lifetime high around $1,920 struck in early September.

"The long term uptrend for gold remains intact and we remain bullish. Gold could climb to about $2,000 an ounce in 2012. Safe haven bids could slowly return as prices stabilise," said Ong Yi Ling, an analyst at Phillip Futures in Singapore

"A sustained breach of $1,700 is needed for gold to resume its upward ascent. After the sell-off in gold earlier, this has reduced some of the speculative positions."

Euro zone finance ministers are reviewing the size of the private sector's involvement in a second international bailout package for Greece, which could undermine the aid programme and hasten the threat of a Greek default.

The euro fell below $1.3200 for the first time since January 13, while the dollar index climbed to 79.696 against a basket of major currencies, reaching highs not seen since January 13.

The physical market paused for breath after a buzz of activity in the past week. Premiums for gold bars were steady at $2 an ounce to spot London prices in Singapore, the highest since February, after a recent correction ignited a rush in buying from jewellers and speculators.

Gold plunged to a two-month low around $1,534 an ounce in late September.

"I can finally take a breath after a few weeks of hectic trading. We saw some selling from Thailand and the Middle East but the market is otherwise quiet," said a physical dealer in Singapore.

In other precious metals, silver and palladium were up more than 1 per cent, while platinum tracked equities lower despite encouraging auto sales in the United States.

Platinum and palladium are used in auto catalysts.

US auto sales rose almost 10 per cent in September, allaying concerns of a double-dip recession as major automakers forecast stronger sales through the remainder of the year.

Still battling to rebound from the effects of the March earthquake in Japan, Toyota Motor Corp and Honda Motor Co posted sales declines of almost 18 per cent and 8 per cent.