LONDON: Gold prices hit six-month highs above $1,370 an ounce on Thursday, extending the previous session's rally, as concerns about Russia's standoff over Ukraine fuelled buying and the dollar dropped to 2-1/2 year lows against the euro. The European Union agreed on a framework on Wednesday for its first sanctions on Russia since the Cold War, a mark of solidarity with Washington in the drive to make Moscow pay for seizing Crimea. German Chancellor Angela Merkel said on Thursday that Russia risked "massive" political and economic damage if it refused to change course on Ukraine, using her strongest rhetoric since the start of the crisis. Spot gold hit its highest since September 10 at $1,374.85 an ounce and was up 0.4 per cent at $1,371.50 an ounce at 1045 GMT, while US gold futures for April delivery were up $1.40 an ounce at $1,371.90. "It is currently the political developments in Ukraine, which are having a negative impact on the stock markets, that are supporting gold," Peter Fertig, a consultant at Quantitative Commodity Research, said. "The weaker data seen in China, and the news that two corporate bonds were in default, has also spooked investors. "Furthermore, you have a stronger euro against the US dollar," he added. "That gave gold the necessary push to overcome resistance yesterday, and that of course triggered further technical buying." Fears that the tensions between Russia and the West over Ukraine could escalate and concerns over slowdown in China have spooked investors, prompting buying of gold as an alternative to cyclical assets like stocks, and volatile currencies. European stocks inched off one-month lows on Thursday, but remained depressed. The FTSEurofirst 300 index has slipped 3.2 per cent since late February, hurt by tensions in Ukraine and worries over a slowdown in Chinese economic growth. The prospect of further inflows of capital and a lack of any easing in European monetary policy helped the euro back to 2-1/2 year highs and the verge of a break above $1.40 on Thursday. BULLISH DEVELOPMENT Technical analysts, who study charts of past price moves to estimate the next direction of trade, say gold's current rally could have further to run. "The bullish development on Wednesday was the close above critical resistance at $1,361.93, the October 2013 high," UBS said in a note on Thursday. "With bullish trending indicators in place and price pattern of higher highs/lows in place since late December, there's scope for more upside in the near-term as the next major resistance is at $1,433.83, the August 2013 high." Physical demand has been subdued due to the price rally, with prices in China - the biggest bullion consumer - trading at a discount to spot prices. Investment funds also saw some profit taking, with the world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares, reporting its first outflow since February 19 on Wednesday. Among other precious metals, silver was up 0.6 per cent at $21.37 an ounce, while spot platinum was up 0.5 per cent at $1,472.49 an ounce and spot palladium was up 0.5 per cent at $773.47 an ounce. A strike in the South African platinum sector by workers at Anglo American Platinum, Impala Platinum and Lonmin entered a seventh week on Thursday. The strike is estimated to be costing come 10,000 ounces per day in lost output.

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