* Gold rises after Fed says will buy $300 bln of debt
* Traders fear move will prompt dollar weakness, inflation
* SPDR gold ETF hits fresh record
(Recasts, adds detail/comment)
By Paul Lauener and Jan Harvey
LONDON, March 19 (Reuters) - Gold jumped to a near
three-week high on Thursday as the dollar tumbled after the
Federal Reserve unveiled plans to spend $300 billion on
long-dated Treasuries.
The dollar extended a sell-off on Thursday after a 3 percent
slide on Wednesday -- its biggest one-day drop since at least
1985 after the U.S central bank announced plans to flood the
market with dollars. []
Spot gold <XAU=> rose to a peak of $957.55 an ounce, its
highest since March 2, and was at $951.40/952.20 an ounce at
1357 GMT, from $940 late in New York on Wednesday.
"The dollar sold off and that's continued again in London
this morning," said Tom Kendall, strategist at Mitsubishi.
Gold traditionally moves in the opposite direction to the
dollar as it is often used as a currency hedge, while a weaker
dollar makes gold cheaper and more attractive for holders of
other currencies.
"We had argued that gold should retrace towards the $850
area on physical dishoarding but now the goalposts have been
moved courtesy of the Fed it is considerably less clear whether
such a pullback is likely," JPMorgan said in a note.
"It is very clear that investors are jumping back into gold
and this flow, which has until recently been overwhelmed by
dishoarding may now get the upper hand."
Central banks in Britain and Japan have already announced
they would purchase their respective government debt, while the
Swiss National Bank last week said outright it would sell francs
to weaken its currency.
RECORD
A rise in gold-backed exchange-traded funds and investment in
gold production also suggested support for gold.
Holdings of the world's largest gold-backed exchange-traded
fund, the SPDR Gold Trust <GLD>, rose to a record 1,084.33
tonnes by March 18, up 15.28 tonnes or 1.4 percent from the
previous day, the latest figures showed. []
Inflows into ETFs are offsetting weakness in jewellery
demand. Data showed exports of gold jewellery from Italy,
Europe's top manufacturer, fell 8.3 percent last year to 4.38
billion euros. []
India gold demand also ebbed on Thursday as traders said
prices were too high. Demand should pick up in mid-April to May
as the wedding season begins. []
Among other precious metals, spot silver <XAG=> surged to
$13.54 an ounce, highest since February 26. It was last at
$13.36/44 an ounce from $12.88 in New York.
Holdings of the world's biggest silver-backed ETF, the
iShares Silver Trust, rose 1.3 percent or 101.18 tonnes on
Wednesday. []
Platinum <XPT=> was at $1,082/1,092 an ounce from $1,057,
having earlier risen as high as $1,099.50, while palladium
<XPD=> firmed to $201/204 an ounce from $197. Earlier it touched
a peak of $206.50, matching its high of February 24.
(Additional reporting by Pratima Desai)
(Reporting by Paul Lauener; editing by Keiron Henderson)
