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Gold pares gains but holds above $700 in Europe

A crunch in global credit markets stemming from problems in the

A crunch in global credit markets stemming from problems in the U.S. subprime, or risky, mortgage sector has forced the world's major central banks to inject emergency funds into the global financial system to prevent it grinding to a halt.

"Investors are getting more confident that bullion has hit a floor and is on the way back up," said Yuki Sonoda, advisor at Daiichi Commodities Co Ltd.

"Finally, a gleam is in sight," he said, adding that a rise in gold held by exchange-traded funds (ETFs) showed steady appetite for gold by funds and other long-term investors.

The latest data showed gold held in New York-listed StreetTRACKS Gold Shares, the world's largest gold-backed ETF, rose to 549.42 tonnes, another record high, up 33.98 tonnes or 6.6 percent from the start of the month.

"We would not be short gold here, however, as the chances of a self-fulfilling rally may occur if more options-related buying lifts the spot price through resistance levels, the most important of which is last years high of $730," John Reade, head of metals strategy at UBS Investment Bank, said in a note.

In one of the latest moves seen as bullish for the price of gold, Australia's Newcrest Mining Ltd. (NCM.AX: Quote, Profile , Research) said it planned to raise A$2 billion ($1.65 billion) via an offering of new shares to fund the closing out of gold hedges and pay back debt.

Newmont Mining Corp (NEM.N: Quote, Profile , Research), the world's second biggest producer, said in early July that it eliminated its entire 1.85 million-ounce gold hedge position.

Gold miners typically hedge more when they think prices are in long-term decline, but like full exposure to a rising market.

In other metals, platinum hit a one-month high at $1,295.50 before easing to $1,288/1,295 an ounce, compared with $1,286.10/1,293.10 in New York. Palladium inched eased to $330.55/334.55 an ounce from $332.50/336.70, while silver was at $12.47/12.51 an ounce, versus $12.51/12.54.