PRECIOUS-Gold hits record high as investors bet on more gains

                                
 * Gold hits record as traders expect dollar weakness
                                
 * SPDR Gold holdings up for second day
                                
 * Gold hits highs in euro, sterling terms
                                
 
                                
 (Updates prices, adds comment)
                                
 By Jan Harvey
                                
 LONDON, Dec 2 (Reuters) - Gold hit record highs at $1,216.75
an ounce in Europe on Wednesday as investors bet on higher
prices, with funds lengthening positions due to expectations of
a fresh leg of dollar weakness and more central bank buying.
                                
 The metal also reached all-time highs in euro and sterling
terms and a historic peak when priced in the Japanese yen,
according to Reuters data, indicating independent gold strength.
                                
 Spot gold <XAU=> was bid at $1,208.20 an ounce at 1343 GMT,
against $1,196.00 late in New York on Tuesday.
                                
 U.S. gold futures also hit a record at $1,218.40 an ounce.
Gold for February delivery <GCG0> on the COMEX division of the
New York Mercantile Exchange was later up $9.60 at $1,209.90.
                                
 The dollar held steady versus the euro <EUR=> on Wednesday,
but analysts said low U.S. interest rates and improving risk
appetite are set to weigh on the U.S. currency. [FRX/]
                                
 "Investors are sailing out of the safe havens into more
risky assets, and this is weakening the U.S. dollar," said Peter
Fertig, a consultant at Quantitative Commodity Research.
                                
 "The facts that stock markets are performing better and we
have weakness in the dollar are supportive for precious metals.
From that perspective I believe this rally remains sustainable."
                                
 Investment interest in gold remained firm, with holdings of
the world's largest gold-backed exchange-traded fund, the SPDR
Gold Trust <GLD>, rising to 1,130.604 tonnes on Tuesday, near
the record 1,134.03 tonnes they hit in June. [GOL/SPDR]
                                
 Gold also hit historic highs in sterling <XAUGBP=R> terms
and when priced in the euro <XAUEUR=R> and yen <XAUJPY=R>. Click
here: http://graphics.thomsonreuters.com/129/GLD_CURR1209.gif.
                                
 Traders said options-related activity was also lifting gold
towards fresh peaks.
                                
 "At these levels the option strikes are the main focus,"
said Simon Weeks, head of precious metals at the Bank of Nova
Scotia. "Yesterday there was a struggle around $1,200, and now
that we are above there, there will be an increasing pull
towards $1,250."
                                
 
                                
 SCRAP FLOWS
                                
 In the physical market, the flow of scrap gold re-entering
the Indian market -- which usually increases when prices rise --
tailed off as sellers sought still higher prices, dealers said.
                                
 Gold demand in India cooled on Wednesday as prices jumped to
record highs. Separately, data showed Turkey imported 393 kg of
gold in November, up from 15 kg a year before but down from
4,209 kg in October. [ID:nGEE5B11E5] [ID:nBOM409343]
                                
 While physical demand in many traditionally key gold buying
countries has been soft, a dip in such buying is being easily
offset by rising speculative interest.
                                
 Speculators are betting on further buying by central banks,
particularly in Asia, after many years of net official sector
sales. India's purchase of 200 tonnes of gold, announced in
November, sparked a 13 percent prices rally that month.
                                
 The move strengthened speculation that other emerging
country central banks will follow suit. [ID:nT8870]
                                
 "We believe that a key fundamental supporting factor for
gold is the continuing shift of central banks and governments
from being net sellers of gold to net buyers," said Daniel
Sacks, portfolio manager of the Investec Global Gold Fund.
                                
 "The gold bull market of the 1970s was in part ushered in by
central bank hoarding of gold," he said. "With central banks
likely to be net gold purchasers this year for the first time
since 1988, a similar scenario appears to be taking shape."
                                
 Strength in gold has lifted other precious metals. Silver
<XAG=> and palladium <XPD=> rallied to their strongest levels
since July 2008. Spot silver was later bid at $19.24 an ounce
against $19.07, and palladium at $385 against $387.50.
                                
 Spot platinum <XPT=> rose as high as $1,493.50 an ounce, its
highest since August last year. It was later at $1,482.50 an
ounce against $1,478.50.
                                
 
                                
 For graphic of gold's inflation-adjusted high, click on:
http://graphics.thomsonreuters.com/129/GLD_PRCINF1209.gif
                                
 
 (Editing by James Jukwey)
 ((jan.harvey@thomsonreuters.com; +44 207 542 7744; Reuters
Messaging: jan.harvey.reuters.com@reuters.net))