Sept. 9 (Bloomberg) -- Gold advanced in London, trading close to a 10-week high, as concern the economic recovery is sputtering spurred demand for the metal to protect wealth. Silver also gained after yesterday reaching the highest price since March 2008. The euro declined against the dollar on speculation European banks will struggle to raise funds amid signs the region’s recovery is stalling. The Federal Reserve yesterday said the American economy showed widespread signs of slowing. Gold is 0.6 percent below a record. “Safe-haven demand remains elevated,” Suki Cooper, an analyst at Barclays Capital in London, wrote today in a report. Immediate-delivery bullion added $2.90, or 0.2 percent, to $1,257.85 an ounce at 12:31 p.m. in London. Prices yesterday reached $1,262.45, the highest level since June 28, and today swung between a gain and loss of 0.3 percent. Gold for December delivery was 0.2 percent higher at $1,259.40 on the Comex in New York. Bullion is set for a 10th annual gain as investors seek protection against financial turmoil in Europe and the prospect of slowing economic growth. Prices reached a record $1,265.30 an ounce on June 21. Gold, traditionally a hedge against rising consumer prices, rallied 14 percent this year amid tame inflation. Prices should climb to $1,300 in the “next few months,” Citigroup Inc. said. Indian Festival Demand The metal fell to $1,253.50 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,255 at yesterday’s afternoon fixing. “Anaemic western-world growth and the likelihood of interest rates in the major economies remaining on hold for many quarters yet have boosted demand,” Citigroup analysts including David Thurtell said in a report. While near-record prices have hurt physical demand, consumption “should be reasonable during the Indian festival season.” The Fed said after the close of European markets yesterday that the U.S. economy maintained its expansion while showing “widespread signs of a deceleration” in mid-July through the end of August, according to a survey by 12 regional Fed banks. Five regional banks reported “economic growth at a moderate pace” and two pointed to “positive developments or net improvements.” The remaining five banks said conditions were mixed or decelerating. German Bank Capital European Central Bank Chief Economist Juergen Stark said that German banks need more capital, FT Deutschland reported, citing participants of a meeting in Berlin. Stark made the remarks to members of the parliamentary party of Chancellor Angela Merkel’s Christian Democrats, the newspaper said. Global holdings of gold by exchange-traded products added 0.61 metric ton to 2,077.84 tons yesterday, according to Bloomberg data from 10 providers. Holdings reached a record 2,081.38 tons on Sept. 1. Silver for immediate delivery in London added 0.4 percent to $19.9938 an ounce after yesterday reaching $20.15, the highest price since March 2008. Platinum dropped 0.1 percent at $1,554.75 an ounce. Palladium added 0.3 percent to $525 an ounce. “Silver prices could benefit from its precious metals status if the global economic recovery faces further headwinds, but rallies will be more limited than those in gold as silver hinges more directly on industrial demand,” Citigroup said. The metal should trade between $18 an ounce and $21 an ounce in the next six to 12 months, the bank said. --With assistance from Candice Zachariahs in Sydney, Sungwoo Park in Seoul and Ron Harui in Singapore. Editors: John Deane, Dan Weeks. To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Sungwoo Park in Seoul at spark47@bloomberg.net. To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.

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