* Inflation outlook, dollar weakness buoy gold
* SPDR gold ETF rises to fresh record
* Platinum tracks gold up to near 6-month high
(Updates throughout, previous TOKYO)
By Jan Harvey
LONDON, March 20 (Reuters) - Gold edged down on Friday as
the dollar's recovery versus the euro prompted profit taking,
pressuring the metal from a three-week high it hit in earlier
trade.
However, prices remain firmly underpinned by investors'
interest in the metal as a haven as they worry about the outlook
for inflation and dollar weakness in the wake of the U.S.
Federal Reserve's move towards quantitative easing.
Spot gold <XAU=> hit a peak of $966.70 an ounce, its firmest
since Feb. 25. It had eased to $954.25/955.75 an ounce by 1043
GMT from $958.60 late on Thursday as the dollar recovered lost
ground against the euro.
Prices have risen sharply since the Fed announced plans on
Wednesday to buy $300 billion in longer-dated Treasuries,
flooding the market with dollars and prompting a sharp drop in
the value of the U.S. currency and a rise in inflation fears.
"When you look at the gold market, there is a huge dynamic
in place, which is an increasing loathing of currencies," said
Nick Moore, an analyst at RBS Global Banking & Markets. "The
only true currency, which is gold, is the beneficiary of that."
"If central banks around the world are keen to avoid
deflation, then by definition they must have inflation, and that
plays straight into gold's hands," he added.
Gold has benefited from a sharply weaker dollar, which
boosts interest in the precious metal as an alternative asset.
The dollar was heading for its biggest weekly fall in 24
years earlier in the session, though worries over the euro zone
economy have since lifted it from lows versus the single
currency. []
Investor interest in gold remains firm, with the world's
largest exchange-traded fund, the SPDR Gold Trust <GLD>,
reporting a fresh 15.28-tonne inflow on Thursday which brought
its holdings to a record. []
Buying of gold by ETFs, which back the securities they issue
with physical stocks of bullion, has formed a major plank of
demand in recent months. SPDR alone has added 323 tonnes of gold
to its reserves so far this year, against 17 tonnes a year ago.
EXCESS
Demand from ETFs is helping to mop up some of the excess
supply in the market left over from a drop-off in jewellery
buying. Jewellers in key markets such as India say the metal's
sharp price rise has hit sales hard. []
It has also led to a surge in supply of scrap gold as
consumers sell old or outdated jewellery to raise cash.
Barclays Capital said in a note it is raising its 2009 gold
price view to $940 an ounce, citing the dollar outlook.
"Plans for further quantitative easing by the U.S. has seen
the dollar nosedive," it said. "In that environment, gold will
shine." []
Among other precious metals, platinum rose to a near
six-month high of $1,127.50 an ounce, boosted by dollar weakness
and strength in the gold price.
The metal, a primarily industrial commodity used as a key
component in autocatalysts, may also be benefiting from a shift
in analysts' attention from a strongly recessionary outlook in
the wake of the Fed statement on Wednesday.
"Given the bullish sentiment in gold and silver and rising
investment demand, we could see platinum target chart resistance
at $1,265," said James Moore, an analyst at TheBullionDesk.com.
Spot platinum <XPT=> was at $1,111/1,116 an ounce from
$1,122.50, while spot palladium <XPD=> was steady at $203/208 an
ounce from $203.50.
Spot silver <XAG=> edges down to $13.52/13.58 an ounce from
$13.57.
(Editing by James Jukwey)
