* Gold rises after Fed says will buy $300 bln of debt
* Traders expect move may prompt dollar weakness, inflation
* SPDR gold ETF hits fresh record
(Updates prices, 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 and inflation
concerns flared after the Federal Reserve unveiled plans to
spend $300 billion on long-dated Treasuries.
Spot gold <XAU=> rose to a peak of $961.50 an ounce, its
highest since Feb. 27, and was at $955.75/956.95 an ounce at
1606 GMT, from $940 late in New York on Wednesday.
Calyon metals analyst Robin Bhar said while the weaker
dollar was benefiting all commodities, it was the longer-term
implications of the Fed's move for inflation that was largely
driving gold higher.
"This will boost the amount of dollars in the system, it
will boost money supply, and it will boost inflationary
expectations down the road," he said.
"The Fed is the last bastion of central banks, and when they
decide to go down this route of quantitative easing, that really
does make a statement," he said.
Gold has long been seen as a key inflation hedge.
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. []
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 ETF, 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. []
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. []
Other precious metals tracked gold higher, also benefiting
from the weaker dollar. Spot silver <XAG=> surged to $13.68 an
ounce, its highest since Feb. 26. It was last at $13.45/52 an
ounce from $12.88.
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=> meanwhile climbed to a five-month peak of
$1,112.50, and was later at $1,105/1,110 an ounce from $1,057.
The metal, which is chiefly used as a component in
autocatalysts, was boosted by the weak dollar. In industry news,
the U.S. Treasury has unveiled a $5 billion bailout for the car
industry. []
Palladium <XPD=> rose to $201/206 an ounce from $197.
Earlier it touched a high of $206.50, matching its high of Feb.
24.
(Additional reporting by Pratima Desai, editing by Anthony
Barker)
(Reporting by Paul Lauener; editing by Keiron Henderson)
