* Gold near $1,570 on worries over inflation, Fed policy
* Gold option strategies bullish, volatility spikes
* Silver retreats after Thursday's record high
* Coming up: U.S. construction spending on Monday
(Rewrites, adds CFTC data)
By Frank Tang
NEW YORK, April 29 (Reuters) - Gold surged to a record high
on Friday for the third straight day, as investors kept up a
buying frenzy fueled by the outlook for low U.S. interest rates
that has propelled bullion to its seventh consecutive weekly
rise, its longest winning streak since 2007.
Bullion jumped to $1,569.30 an ounce as U.S. consumer
spending rose for a ninth straight month in March with
inflation at its highest in nearly a year. Platinum group
metals also rose about 2 percent but silver fell 1 percent
after soaring to record high in the previous session.
Option traders reported strong buying of call options and
call spreads, reflecting bullish market expectations. A gauge
of bullion market volatility also spiked in response to a sharp
price rally.
"What has been driving gold is an abundance of liquidity of
Fed policy that remains exceedingly accommodative, which is
going to work against the U.S. dollar," said Mark Luschini,
chief investment strategist of broker-dealer Janney Montgomery
Scott, which manages $53 billion in client assets.
"There is worry that inflation, which is not a problem
right now, could escalate to become one. And once it does, it
becomes very difficult to put the genie back into the bottle,"
he said.
The CBOE gold volatility index <.GVX>, which measures
bullion investor anxiety, rose 6 percent to its highest level
in five weeks.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Gold technical outlook: http://r.reuters.com/qem39r
Graphic on silver as best-performing commodity:
http://r.reuters.com/duj88r
Graphic of CFTC fund positions:
http://r.reuters.com/buv87r
Take a Look on rise of gold, silver []
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
Spot gold <XAU=> was last up 1.8 percent at $1,563.30 an
ounce by 5 p.m. EDT (2100 GMT), having earlier hit an all-time
high $1,569.30. The metal notched a 9 percent monthly gain, its
strongest since November. Bullion also posted its seventh
consecutive weekly rise, its longest winning streak since
2007.
U.S. June futures <GCM1> settled up 1.7 percent at
$1,556.40 an ounce, with trading volumes about one-third below
its 30-day average due to a public holiday in London.
On the options front, heavy buying of outright call options
and bull call spreads of June 2012 calls with strikes $1,800
and $2,000, said COMEX gold options floor trader Jonathan
Jossen.
Bull call spread is an option play involving the buying of
calls at one strike price while selling them at a higher strike
with the same expiration date. Investors often expect prices to
rise moderately with the strategy.
A slight drop in the dollar also contributed to bullion's
gains. Earlier in the week, expectations of further weakness in
the dollar were the biggest drive for gold and silver rallies
to records. []
SILVER RETREATS FROM RECORD
Silver retreated from the record high it set Thursday, but
was still by far the best-performing commodity in April and so
far in 2011. It posted a near 27 percent rise in April, its
biggest monthly gain since April 1987.
Silver <XAG=> was last down 0.8 percent at $48.03 an
ounce.
Silver gained 3 percent this week, although analysts say
its robust performance against the other precious metals may
not be sustainable.
"If silver doesn't make a new high and sustain above that,
it may go through a more vicious correction here. So, gold in
the short term could go down in sympathy of that," said James
Dailey, portfolio manager of the TEAM Asset Strategy Fund.
Speculators scaled back their bullish bets in COMEX silver
futures and options to the lowest level since early February,
even as prices neared the psychological $50 an ounce, regulator
data showed Friday. []
The CME Group Inc <CME.O>, parent of the Chicago Board of
Trade, said on Thursday it would raise maintenance margins for
silver futures by 13.2 percent, its second time this week,
making it more expensive for silver speculators to trade in.
[]
For platinum group metals, platinum <XPT=> echoed the
strength in gold, rising 1.9 percent on the day to $1,870.49 an
ounce, while palladium <XPD=> rose 2.6 percent to $790.97.
Prices at 3:40 p.m. EDT (1939 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCM1> 1556.40 25.20 1.6% 9.5%
US silver <SIK1> 48.584 1.064 0.0% 57.0%
US platinum <PLN1> 1865.50 25.60 1.4% 4.9%
US palladium <PAM1> 792.15 16.85 2.2% -1.4%
Gold <XAU=> 1562.60 27.65 1.8% 10.1%
Silver <XAG=> 48.03 -0.38 -0.8% 55.6%
Platinum <XPT=> 1870.49 35.39 1.9% 5.8%
Palladium <XPD=> 790.97 19.74 2.6% -1.1%
Gold Fix <XAUFIX=> 1535.50 4.50 0.3% 8.9%
Silver Fix <XAGFIX=> 48.70 340.00 7.5% 59.0%
Platinum Fix <XPTFIX=> 1835.00 15.00 0.8% 6.0%
Palladium Fix <XPDFIX=> 777.00 8.00 1.0% -1.8%
(Editing by Marguerita Choy)
