LONDON (Reuters) - Gold rose on Tuesday as the euro turned higher versus the dollar amid expectations Greece will announce new austerity measures, with currency market volatility lending support to bullion as an alternative asset.
Gold priced in sterling held near the previous session's record high as the British currency eased on Tuesday.
Spot gold was bid at $1,120.60 an ounce at 1411 GMT, against $1,118.40 late in New York on Monday. U.S. gold futures for April delivery on the COMEX division of the New York Mercantile Exchange rose $3.30 to $1,121.60 an ounce.
The euro recovered from the 9-1/2-month low it hit versus the dollar in earlier trade as traders anticipated that Greece will announce new austerity measures.
Dollar weakness lifts gold's appeal as an alternative asset and makes dollar-priced commodities cheaper for other currency holders. "The euro is an easy explanation," said VTB Capital analyst Andrey Kryuchenkov. "(Gold) is taking its cue from the dollar."
Fears over the fiscal health of peripheral euro zone economies have weighed heavily on the euro so far this year, knocking it down by nearly 5.5 percent against the dollar.
The European Union on Monday urged Greece to agree additional austerity measures within days to tackle its fiscal crisis. Greek officials said a cabinet meeting on the economy will take place on Wednesday.
Adding to pressure on the euro, former European Central Bank economist Otmar Issing said Greece should turn to the International Monetary Fund rather than other euro zone states for help in tackling its debt crisis.
Euro-priced gold rose above 830 euros an ounce early on Tuesday, within a few cents of its record high of 830.41 euros an ounce set last week. It later pared gains as the euro firmed.
STERLING GOLD EYES HIGH
Sterling-denominated gold also rose to a high of 752.06 pounds an ounce, near Monday's record high at 753.69 pounds an ounce, as the British currency was driven lower by fears that the next UK general election could result in a hung parliament.
This could mean an incoming government would struggle to take the action necessary to reduce debt, analysts said.
"Markets fear the UK government will be forced to create more sterling in order to buy their own government bonds and that quantitative easing and debt monetization may continue for longer than expected," bullion dealer GoldCore said in a note.
"The Bank of England continuing to punish savers with near zero percent interest rates at 0.5 percent while inflation appears to be looming is also contributing to concerns about a new sterling currency crisis."
This could lead to further gains in gold, it added.
In the physical market, sales of gold scrap picked up in Southeast Asia due to recent gains in bullion prices, while Indian buyers stayed on the sidelines.
The world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings stood at 1,106.987 tons by March 1, unchanged from the previous business day.
Elsewhere, silver was at $16.58 an ounce against $16.45, platinum at $1,557 an ounce versus $1,546.50, and palladium at $437.50 an ounce versus $433.50.
"For the first time, the platinum ETF that was launched in the United States at the beginning of this year faced outflows of 25,000 ounces," said Commerzbank in a note.
"Obviously, short-term oriented speculative investors withdrew, after platinum did not deliver the price performance they had hoped for."
(Editing by Sue Thomas)
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