LONDON: Gold hit a second successive record high on Wednesday, driven by deepening fears over the spread of the European debt crisis and its impact on regional growth, while data showed a number of central banks including Thailand bought gold in June. The United States managed to avert an unprecedented debt default on Tuesday after lawmakers agreed to raise the country's borrowing limit. But, the focus turned to credit ratings agencies, which have warned the country could lose its top-notch rating as its finances remain fragile. The nervousness over the US economy was compounded by the latest developments in Europe, where Italian bond yields rose to their highest in over a decade above 6 per cent, a level widely viewed as unsustainable, adding to the lure of gold as a safe-haven investment. Meanwhile, the International Monetary Fund's monthly report on central bank reserves showed Thailand, Russia and Kazakhstan, among others, added to their holdings of gold two months ago, prolonging the trend in the official sector to put more of their reserves into bullion rather than hard currencies. Spot gold was last quoted at $1,670 an ounce, up 0.6 per cent on the day at 0855 GMT, having hit a record $1,672.65 earlier. US gold futures were last up 1.7 per cent at $1,672.40 an ounce. "If you look at the European bond markets, you will see yields on Italian and Spanish bonds are back above 6 per cent, so this crisis, unfortunately, seems to be spreading to Italy and Spain, which is also potentially more serious than Greece, because they're much larger," said Jesper Dannesboe, senior commodities strategist at Societe Generale. "Gold is reacting to this and that is the main driver right now," he said. Further unnerving the financial markets was the Swiss National Bank's decision to cut rates to fight the strength of the currency , which set the price of gold in Swiss francs on course for its biggest one-day gain since May. THAILAND BUYS The IMF data showed Thailand boosted its gold reserves for the third time in the last year, by 18.66 tonnes in June to 127.524 tonnes. Korea said earlier this week it bought gold for the first time in over 10 years in June and July. Gold is set for a 17 per cent gain in 2011, which would mark an eleventh successive year of price rises.

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