By Kim Kyoungwha April 29 (Bloomberg) -- Gold may climb to the highest level in almost five months after Spain’s credit rating was cut by Standard & Poor’s and the potential widening of a rescue package for Greece boosted demand for the metal as a haven. Gold for immediate delivery rose as much as 0.2 percent to $1,168.53 an ounce and was at $1,166.85 at 1:54 p.m. in Singapore. It climbed to $1,174.48 yesterday, the highest price since Dec. 4 and set records for a second day in euro, sterling and the Swiss franc. “There’s a potential for further price gains in gold as an inability by some European countries to service debt fuels flight-to-quality sentiment,” said Chris Yoo, head of the global derivatives team with Samsung Futures Inc. in Seoul. Gold is on course for its biggest monthly advance since November, adding 4.8 percent in April, after a 1.5 percent gain in the first quarter. Bullion, which has rallied for nine straight years, climbed 24 percent in 2009 as the dollar fell 4.2 percent against a basket of six major currencies. Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, expanded for a third day to a record 1,152.91 metric tons yesterday, according to figures on the company’s Web site. “In direct contrast to gold’s performance in the first quarter, the yellow metal is behaving like a safe-haven asset right now as contagion risks escalate,” Edel Tully, London- based analyst with UBS AG, wrote in a report. “Gold has been presented with its best opportunity to shine this year.” Gold may rally to a record $1,500 an ounce this year as the European sovereign debt crisis escalates, with Greece “going under” and investors losing confidence in paper currencies, David Crichton-Watt, manager of Phoenix Gold Fund Ltd., said in an interview today. European Woes Europe’s single currency weakened against 12 of its 16 most-active counterparts after German lawmakers yesterday said Greece may need as much as 120 billion euros ($158 billion) of aid, citing International Monetary Fund Managing Director Dominique Strauss-Kahn. Strauss-Kahn wouldn’t comment. The euro extended its decline after S&P lowered Spain’s credit rating to AA from AA+ with a negative outlook. The company also this week cut Greece’s credit rating to junk and reduced Portugal’s to the third-lowest investment grade. Nouriel Roubini, the professor who forecast the U.S. recession more than a year before it began, said yesterday that Greece’s problems may be “the tip of the iceberg” for a wider range of fiscal problems. Governments may print money to “monetize” their debts, fueling inflation, Roubini said. The Dollar Index fell 0.3 percent today after rising as much as 0.7 percent yesterday to the highest level since May, 2009. Silver increased 0.1 percent to $18.104 an ounce, platinum rose 0.4 percent to $1,713.70 an ounce and palladium advanced 0.5 percent to $543 an ounce. --Editors: Richard Dobson, Matthew Oakley. To contact the reporter on this story: Kyoungwha Kim in Singapore at Kkim19@bloomberg.net To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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