Gold rebounded on short covering on Friday after falling around 1 percent in the previous session, while a rise in ETF holdings to another record showed bullion still attracted buying from investors. But gold was still at the mercy of movements in equity and currency markets, with rallies in shares likely to curb gains. Gold hit a lifetime high $1,251.20 earlier this week on fears the euro zone's sovereign debt crisis may spread. Spot gold [XAU=X 1220.0 4.20 (+0.35%) ] was at $1,219.50 an ounce in Asian trade, up $3.70 from New York's notional close on Thursday, when it slipped after a rally in Wall Street curbed safe-haven demand. U.S. gold futures for August delivery hardly changed at $1,221.7 an ounce after a drop on Thursday as gains in the euro eased fears about euro zone credit contagion. The world's largest gold-backed exchange-traded fund, SPDR Gold Trust [XAU=X 1220.0 4.20 (+0.35%) ], said its holdings rose to a lifetime high at 1,306.137 tonnes as of June 10. Japan's benchmark Nikkei average rose 2.01 percent to 9,734.33 on Friday after U.S. stocks posted their best day in the last nine on Thursday in response to signs of health in the euro debt market. The euro's short-covering rally paused above $1.2100 on Friday, with the single currency squaring up to test significant bands of resistance, and the Australian dollar held strong gains as firmer share markets improved risk tolerance. Investors also breathed a sigh of relief after European Central Bank President Jean-Claude Trichet said three-month emergency loans to banks would continue until September and when Germany's high court rejected efforts to block German guarantees for euro zone financial aid. U.S. crude futures stood steady on Friday after closing at a four-week high above $75 a barrel a day earlier on the back of a Wall Street rally and a rosier oil demand forecast by International Energy Agency.

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