LONDON, Oct 10: Gold climbed 2 per cent to a 2-1/2 month high in Europe on Friday as tumbling stock markets prompted investors to seek safer assets such as bullion.

Spot gold was quoted at $918.15/921.65 an ounce against $911.50 an ounce late in New York on Thursday. Earlier it touched a session high of $931 an ounce, its strongest level since July 29.

The weakness in the stock markets in Europe sent gold higher to take out the $930 level, said Peter Fertig, a consultant at Dresdner Kleinwort. But as equities recovered from initial lows, gold came down a little. Currently it is fear that is dominating, he added.

Gold often moves in line with crude prices, as it can be bought as a hedge against inflation. However, traders say in the current climate gold is trading with greater independence from its usual external drivers, oil and the dollar.

Demand from larger investors for bullion-related products like gold-backed exchange traded funds, and from smaller buyers for investment coins and bars, remains strong, analysts say.

Various mints of gold coins are struggling to keep up with demand and premiums for physical metal are reported to be running high, Fairfax analyst John Meyer said.

The world’s largest bullion-backed ETF, New York’s SPDR Gold Trust, said its holdings rose to a record 765.74 tons on Thursday as investors sought a haven from risk.

However, higher prices are causing some selling in India ahead of this month’s Hindu festivals.

There are a lot of sellers today, mainly holders of small quantities of jewellery and bars, Jitendra Kantilal, a partner at bullion dealer Jugraj Kantilal & Co, told Reuters.

Among other precious metals, silver was quoted at $11.68/11.76 against $12.01 late in New York on Thursday.

The platinum group metals inched lower. Spot platinum was trading at $1,002.50/1,026.50 an ounce against $1,018.50, while its sister metal palladium edged down to $193/203 from $198.

Both PGMs have suffered from fears over falling demand from carmakers, who account for around half of global consumption.

However, analysts say in the longer term palladium is likely to find better support than platinum. Not only do we expect palladium prices to recover next year and beyond but they could outperform platinum, said RBS strategists in a note.—Reuters