(Reuters) - Gold prices hit a record $1,578.50 an ounce on Wednesday as concerns over the euro zone debt crisis deepened, and after minutes to the Federal Reserve's June meeting suggested some members were pondering the possible need for additional easing.
Spot gold was bid at $1,572.99 an ounce at 1203 GMT against $1,565.25 late in New York on Tuesday. U.S. gold futures for August delivery were up $11.30 an ounce at $1,573.60, also off a record $1,579.70.
Gold is set for an eighth consecutive day of gains, something it has not achieved since mid-October 2006, when it rose for nine days in a row.
European Union leaders are expected to hold an emergency meeting on Friday after finance ministers acknowledged for the first time that some form of Greek default may be needed to cut Athens' debts and stop contagion spreading to Italy and Spain.
On the other side of the Atlantic, minutes of the Fed's last meeting showed some Federal Reserve officials believe further monetary policy easing could be needed if the recovery remains too sluggish to cut the stubbornly high U.S. jobless rate and if inflation eases as expected.
"The debt crisis is if anything escalating, with ratings agencies now downgrading Ireland into junk territory. You have had rethinking on what should happen," said Credit Agricole analyst Robin Bhar.
"We'll know more about thinking on the U.S. when Bernanke testifies, but it was interesting that the Fed, according to the minutes of the June meeting, seemed to bring about more thinking about quantitative easing... those Fed minutes seem to have stoked the fires (for gold)."
Fed chairman Ben Bernanke is due to testify on the U.S. economy and monetary policy before the House Financial Services Committee at 1400 GMT.
His comments will be closely watched for any clues as to a further round of quantitative easing, a key driver of gold's rally to record highs earlier this year as it kept U.S. interest rates and the dollar low, cutting the opportunity cost of holding bullion, which bears no yield of its own.
Gold rallied to record highs in sterling and South African rand as well as dollars on Wednesday, and held near the last session's all-time high in euro terms.
The euro bounced on Wednesday as risk-averse investors took a breather in their recent battering of the stocks and bonds from more indebted euro zone nations such as Italy, Portugal and Spain, but was not far from four-month lows against the dollar.
"While the (euro zone debt) issue has been bubbling away, it hadn't been acute enough to drive people into the strongest safe-haven. That situation has clearly changed in the last couple of days," said RBS analyst Daniel Major.
GOLD ETF HOLDINGS RISE
Reflecting the heightened investor demand for metal, global holdings of gold in exchange-traded products witnessed their largest daily inflow since early April, driven by a hefty rise in holdings of metal in the SPDR Gold Trust, the world's largest gold-backed ETF.
Adding to worries about the euro zone debt crisis, Moody's cut Ireland's sovereign rating to junk status and warned of the likelihood of Dublin needing a second bailout, a week after it cut Portugal to junk.
"With European sovereign debt fears intensifying again, little clarity on what Eurozone officials intend to do next and cross-asset market confidence taking a bashing, gold has been a beneficiary, much like the Swiss franc. And in this nervous environment, we prefer assets that have limited downside exposure - i.e. gold over other precious metals and commodities," said UBS strategist Edel Tully.
Spot silver was last up 1.7 percent on the day at $36.65 an ounce, bringing the gold/silver ratio -- the number of ounces of silver needed to buy one ounce of gold -- to 43.06 from 43.46 on Tuesday.
Palladium, which depends largely on the Chinese car market as a source of demand for the metal in gasoline-powered vehicles, rose 1.3 percent to $771.97 an ounce.
Platinum echoed the strength in other industrial precious metals and rose 0.9 percent to $1,744.99.
Source: www.reuters.com
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