By Nicholas Larkin and Kim Kyoungwha May 14 (Bloomberg) -- Gold rose to a record in London and New York as investors bought the precious metal as an alternative to holding currencies amid Europe’s debt crisis. The euro fell to a 14-month low against the dollar amid speculation that debt-cutting measures by European nations will undermine economic growth. Deutsche Bank AG Chief Executive Officer Josef Ackermann said Greece may not be able to repay its debts in full, while former Federal Reserve Chairman Paul Volcker yesterday said that he’s concerned that the euro area may break up. Gold advanced to records in European currencies. “A lot of people still believe it’s going to be very difficult to resolve the European debt” situation, said Bernard Sin, head of currency and metals trading at bullion refiner MKS Finance SA in Geneva. “Gold has detached itself from other financial instruments. It’s basically trading all by itself.” Gold prices are set for a 10th annual gain, the longest winning streak since at least 1920. The rally attracted hedge- fund managers John Paulson and Paul Tudor Jones. Holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, are at an all-time high and exceed those of Switzerland’s central bank. Gold for immediate delivery climbed as much as $16.70, or 1.4 percent, to $1,249.40 an ounce and traded at $1,245.82 at 12:18 p.m. in London. The metal is up 3.1 percent this week. Bullion for June delivery increased as much as 1.7 percent to $1,249.70 on the Comex in New York and was last at $1,246. ‘Uncharted Territory’ Bullion rose to $1,238.75 an ounce in the morning “fixing” in London, used by some mining companies to sell production, from $1,237.50 at yesterday’s afternoon fixing. Fifteen of 19 traders, investors and analysts surveyed by Bloomberg, or 79 percent, said prices would rise next week. Two forecast lower prices and two were neutral. “Gold will continue its rally, given strong demand from investors unnerved by the turbulence in Europe’s debt-ridden nations,” said Chris Yoo, head of the derivatives team at Samsung Futures Co. in Seoul. “Gold is moving into uncharted territory in terms of prices.” European governments are planning austerity measures after policy makers and the International Monetary Fund pledged almost $1 trillion to rescue indebted nations. Spain this week unveiled the biggest round of budget cuts in 30 years in an effort to prevent contagion from Greece’s fiscal crisis, and Portugal said yesterday it will increase taxes. French President Nicolas Sarkozy threatened to exit the euro unless German Chancellor Angela Merkel agreed to back the European Union’s bailout plan at a meeting last weekend, El Pais reported, citing comments Spanish Prime Minister Jose Luis Rodriguez Zapatero made at a meeting of socialist politicians. The newspaper didn’t say how it obtained the information. Record Prices Gold is up 14 percent this year in dollars in London. The metal climbed to records of 1,002.672 euros an ounce, 861.1171 British pounds and 1,404.613 Swiss francs today. The euro, which generally has moved in tandem with gold as an alternative to the dollar, has slumped 13 percent this year. Gold and the U.S. Dollar Index, a six-currency gauge of the greenback’s strength, have gained the previous three weeks and both climbed for a second straight quarter in the first three months of 2010. Holdings in the SPDR Gold Trust have advanced 6.7 percent this year to a record 1,209.5 metric tons. The fund’s holdings were unchanged yesterday, according to its website. The metal may exceed $1,300 an ounce in its “current rally,” Numis Securities Ltd. analysts including Cailey Barker said today in a report. ‘Weakest Period’ “June to August is seasonally the weakest period for gold demand, which may mute the run,” the analysts said. “Thus we think it may remain range-bound” around $1,100 to $1,300, they said. Among other precious metals for immediate delivery in London, platinum lost 0.8 percent to $1,721.50 an ounce. Palladium dropped 0.9 percent to $535.35 an ounce. Silver rose 1 percent to $19.6225 an ounce after reaching a two-year high yesterday. --Editors: John Deane, Dan Weeks. To contact the reporters on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net. To contact the editor responsible for this story: Stuart Wallace at swallace6@bloomberg.net.

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