* Dollar tanks as Fed cuts interest rates to 0-0.25 pct
* Oil traders eye OPEC production decision
* SPDR Gold Trust bullion holdings rise again
(Recasts; updates prices; adds comment)
By Jan Harvey
LONDON, Dec 17 (Reuters) - Gold climbed more than 1 percent
on Wednesday as the dollar weakened against the euro in the wake
of the U.S. Federal Reserve's decision to slash interest rates
to between zero and 0.25 percent.
Spot gold <XAU=> was quoted at $871.30/873.30 an ounce at
1458 GMT, a two-month high, up from $857.35 an ounce late on
Tuesday in New York. U.S. gold futures for February delivery
<GCG9> were up $26.30 at $869.00.
"The primary factor is that the dollar is at 1.40 to the
euro, which is an amazing turnaround," said VM Group analyst
Matthew Turner.
Fresh dollar weakness is allowing gold to react to other
price-positive factors in the market, Turner added.
"All this monetary easing and talk of printing money should
have been good for gold, but that wasn't showing up. It was
almost impossible when then dollar was rising," he said.
The dollar sank to a fresh 2-1/2 month low versus the euro
in the wake of the Fed decision late Tuesday, as part of which
it said it would use "all available tools" to battle recession.
The announcement spurred selling of the dollar and helped
the euro to post an 11 percent gain against the U.S. currency on
the month to date. []
The other main external driver of gold, crude oil prices,
eased a touch as the markets awaited an expected 2 million
barrel output cut from the Organization of the Petroleum
Exporting Countries (OPEC). []
Delegates said the group could yet opt for a 2.5 million
barrel cut. OPEC is attempting to shore up the falling oil
price, which has dropped about $100 a barrel from the highs it
hit earlier this year.
Physical demand for gold was mixed, however, with traders
reporting falling interest in gold coins and bars in Europe and
Indian buyers said to be staying away until prices fall.
But investment demand for gold-backed exchange-traded funds
was firm. The world's largest bullion-backed exchanged-traded
fund (ETF), the SPDR Gold Trust <GLD>, said its gold holdings
rose 3.98 tonnes on Dec. 16 and are up 1 percent or 7 tonnes
since Friday. []
PLATINUM STEADIES
Among other precious metals, platinum and palladium were
little changed. The two metals, which are primarily used to make
catalytic converters, have fallen sharply in recent months on
fears demand would suffer from a slowdown in car sales.
Platinum is now trading close to parity with gold, a
situation last seen in 1996. However, the metal is likely to
recover next year, analysts said.
"Current price levels for platinum group metals are not
sustainable for many South African producers unless there is a
sharp weakening of the rand," said Fairfax analyst Marc Elliott.
"Consequently the eventual recovery of the automotive market
appears likely to prompt a shortage that should lift PGM prices
perhaps to levels seen earlier this year."
"However, for the next few months we see little reason for a
substantial improvement, unless some major production cuts (or)
disruptions take place," he added.
Spot platinum <XPT=> was quoted at $861/871 an ounce against
$860.50 late on Tuesday in New York, while palladium <XPD=> was
at $177/182 an ounce against $178.
Silver <XAG=> rose to $11.44/11.52 an ounce from $11.21.
(Reporting by Jan Harvey; editing by Karen Foster)
