LONDON: Gold held steady below $1,250 an ounce on Friday after a slight improvment in risk appetite weighed on prices but bullion still looked on track to test record highs on lingering worries about the global economy. Bullion touched its highest in two months above $1,262 an ounce this week on renewed worries about the European banking sector, before losing some gains to profit-taking and better-than-expected US data on jobless benefits on Thursday. Spot gold was at $1,248.65 an ounce by 0934 GMT, versus $1,248.27 an ounce late in New York on Thursday. Bullion struck a record high just under $1,265 in June. "The upward trend is still very much in place," said analyst Daniel Brebner at Deutsche Bank. "We have seen marginal improvement in risk appetite but worries about European sovereign debt...that's kept investors cautious," he said. "It's just a matter of time before we hit $1,300 an ounce," Brebner added. European shares fell as reports that Deutsche Bank plans to raise capital sparked worries about the whole banking sector. In Asia, stocks had hit a four-month high as some investors were inspired by positive US and Japanese economic data. The dollar edged down against a basket of currencies, making dollar-denominated gold cheaper for non-US currency holders, but still failed to lift bullion. "There is some selling interest around highs, some profit-taking after recent rallies," said Commerzbank trader Michael Kempinski. "But I believe the downside is pretty limited," he said. US gold futures for December delivery was flat at $1,250.9 an ounce. The all-time high on the December futures chart sits at $1,270.60 per ounce. CENTRAL BANK INTEREST Interest from Asian central banks in bullion was another factor which supported the prices in the long-term, analysts said, after The International Monetary Fund said it sold 10 tonnes of gold to the central bank of Bangladesh this week. "The news indicates that Asian banks continue to raise gold holdings in preference to currency," said analyst John Meyer at Fairfax in a research note. "It is typical for further central bank gold purchases to follow," he added, predicting higher prices for gold over the next few months. The gold market is sensitive to buying by Asian central banks. Purchases by India, Mauritius and Sri Lanka helped boost prices earlier this year, while speculation China was in the market for IMF gold in February, ultimately unfounded, sent prices higher by 1 per cent. The world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings slipped to 1,293.531 tonnes by Sept 9 from 1,294.442 tonnes by Sept 3. The holdings hit a record at 1,320.436 tonnes on June 29. Spot silver was at $19.84 an ounce from $19.79 late in New York on Thursday. It touched $20.14 an ounce earlier this week, its highest since March 2008. Deutsche Bank analysts said silver could outperform the precious metals complex. "However, given our conviction that central bankers will lean heavily towards an inflationary outcome rather than deflationary, we expect that precious metals such as silver or palladium could outperform in a precious metals context." Palladium was at $520.75 an ounce versus $518.73 an ounce while platinum was at $1,551 an ounce compared with Thursday's $1,548.28 an ounce.

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