* Dollar softens against currency basket after U.S. GDP data
* Prospects of fresh cenbank buying, inflation support gold
* SPDR gold ETF holdings rise to highest since late June
(Releads, updates prices, adds comment)
By Jan Harvey
LONDON, Nov 24 (Reuters) - Gold prices held near $1,170 an
ounce on Tuesday after data showing the U.S. economy grew less
than expected in the third quarter pushed the dollar lower,
supporting investment in the metal as an alternative asset.
Prices climbed in earlier trade as the prospect of rising
inflation next year and more gold acquisitions by the official
sector prompted buying. The initially stronger dollar capped
gains, but its downturn has helped support gold's rise.
Spot gold <XAU=> was bid at $1,169.10 an ounce at 1414 GMT,
against $1,165.85 late in New York on Monday. In that session it
hit a record high of $1,173.50 an ounce.
Gold prices have risen 12 percent since the beginning of
November, when reports emerged that India's central bank had
bought 200 tonnes of gold from the IMF. Russia, Sri Lanka and
Mauritius have all since also announced gold acquisitions.
"If central banks buying gold are diversifying their
reserves back from the U.S. dollar to gold or other assets, that
is a sign that (investors) should stay long gold and short the
dollar," said Deutsche Bank trader Michael Blumenroth.
"As long as the market is thinking there is inflation to be
expected next year...central banks are buyers rather than
sellers, and there is fresh investment money flowing into the
market, there is no way you want to sell gold," he added.
The dollar fell against a currency basket on Tuesday after
preliminary data showed the U.S. economy grew at a slower pace
in the third quarter than previously thought. []
[]
"Investors are coming in, especially if the U.S. dollar is
under pressure against the major currencies," said Peter Fertig,
a consultant at Quantitative Commodity Research.
"Definitely prices could still go higher -- $1,200 is within
reach, and there is no reason why it should not be reached this
calendar year," he added.
WHOLESALE DEMAND
Gold's correction from record highs in earlier trade led to
a pick-up in wholesale demand for the metal in major bullion
consumer India, traders said.
Any further dips are likely to be met by strong buying, they
added. "People are asking for $1,150, we have a few orders at
that level," said a dealer with a state-run bank in Mumbai.
Analysts and fund managers say that in addition to dollar
weakness, inflation prospects in 2010 and more official sector
buying are set to support prices.
"The investment case for gold has become increasingly
compelling, with central bank buying and a structural change in
interest in gold as an investment at the retail level,"
Standard Chartered said in a note.
The bank said although pockets of dollar strength would
likely check gold's progress in the first half of next year, by
the fourth quarter it is set to average $1,300 an ounce.
For graphic showing gold's relationship to inflation
expectations, click on:
http://graphics.thomsonreuters.com/119/GLD_INFP1109.gif
The world's largest gold-backed exchange-traded fund, the
SPDR Gold Trust <GLD>, said its holdings stood at 1,121.457
tonnes as of Nov. 23, up 3.964 tonnes from the previous business
day and their highest since late June. []
Elsewhere, silver <XAG=> was at $18.57 an ounce versus
$18.59, platinum <XPT=> at $1,455 an ounce against $1,454.50,
and palladium <XPD=> at $370 an ounce against $369.
ETF Securities said its palladium ETP <PHPD.L> holdings rose
more than 13,600 ounces to a record high of 611,924 ounces on
Monday. Holdings of its platinum-backed product <PHPT.L> edged
up to 423,439 ounces from 422,762 ounces, also a record high.
(Editing by Sue Thomas)
((jan.harvey@thomsonreuters.com; +44 207 542 7744; Reuters
Messaging: jan.harvey.reuters.com@reuters.net))
