By Nicholas Larkin and Kim Kyoungwha June 18 (Bloomberg) -- Gold, headed for the biggest weekly gain in three weeks, may advance as investors buy the metal to protect wealth from Europe’s financial turbulence and on concern that the economic recovery isn’t as strong as expected. The metal, set for an eighth weekly gain in nine weeks, rose to within 0.4 percent of a record $1,252.11 an ounce set last week. U.S. data yesterday showed slowing manufacturing growth and an increase in jobless claims. European Union leaders yesterday agreed to disclose how banks perform on stress tests, seeking to show the financial system can withstand shocks. “Bullion continues to draw support from its appeal as an alternative asset to currencies, being a perfect hedge against excess liquidity and any sovereign default risks,” said Andrey Kryuchenkov, an analyst at VTB Capital in London. “Souring sentiment could well push the market higher,” and the metal may climb to $1,270 if prices rise above resistance at $1,251, he said. Gold for immediate delivery lost $1.15, or 0.1 percent, to $1,244 an ounce at 9:19 a.m. local time. The metal earlier traded as high as $1,248.35 and is up 1.4 percent this week. Bullion for August delivery was 0.3 percent lower at $1,245.10 on the Comex in New York. Gold has climbed 13 percent this year, outperforming stocks, bonds and many other commodities, amid speculation that debt-cutting measures by European nations will slow growth. The euro has dropped 13 percent against the dollar this year, while the MSCI World Index of equities is down 4.5 percent. Raw materials as measured by the Reuters-Jefferies CRB Index fell 7.1 percent this year. U.S. Jobless Claims Reports released yesterday showed U.S. jobless claims increased by 12,000 to 472,000 in the week ended June 12 and lower-than-estimated growth in Philadelphia manufacturing in June, casting doubt on the strength of the economic recovery. Eighteen of 20 traders, investors and analysts surveyed by Bloomberg, or 90 percent, said bullion would rise next week. None forecast lower prices and two were neutral. The metal is heading for a 10th straight annual increase, the longest run since at least 1920. “We are still very bullish on gold,” said Hwang Il Doo, a senior trader with KEB Futures Co. in Seoul. “Gold will remain the main beneficiary of what’s happening in Europe unless the picture takes a turn for the better.” Assets in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, increased 1.83 metric tons to a record 1,307.96 tons yesterday, according to the company’s website. Global holdings of the metal by ETFs increased 2.57 tons to an all-time high 2,044.62 tons yesterday, according to Bloomberg data tracking 10 providers. China Holdings China should increase its holdings of precious metals and oil as it invests its foreign reserves, Yin Zhongqing, vice chairman of the finance committee of National People’s Congress, said at a conference in Shanghai today. Gold accounts for 1.6 percent of the reserves held by the People’s Bank of China, according to the World Gold Council. Silver for immediate delivery in London added 0.2 percent to $18.7525 an ounce. Platinum was 0.4 percent lower at $1,573.30 an ounce and palladium was down 0.7 percent at $478.50 an ounce. --Editors: John Deane, Dan Weeks. To contact the reporter on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net. To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.

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